Macro Monday: Chinese AI DeepSeek Scares U.S. Market ft. Andreas Steno & Mikkel Rosenvold

0:28This episode is sponsored by Token 2049. and the place to be for everyone in crypto this April. Grab your tickets at Dubai.Token2049.com with promo code Real Vision for an exclusive 10 % off, only while tickets last.

0:43Consensus Hong Kong 2025 is where the global crypto community converges to shape the next era of Web3. From February 18th through the 20th, Hong Kong becomes the meeting point for leaders across finance, technology, and digital assets. This isn't just a conference. It's where deals are made, partnerships are forged, and new opportunities emerge. Consensus features exclusive networking lounges, expert-led sessions, and invaluable insights from top industry voices. Whether you're expanding your network, building your brand, or closing your next big deal, this is the event that moves markets. Visit coindesk.com forward slash consensus dash HK to secure your spot and use Real Vision 15 for 15 % off.

1:28Don't miss your chance to be part of the industry's defining moment.

1:46Hello out there, everyone, and welcome to this week's edition of Macro Mondays. My name is Mikkel Rosenwald, and as usually I'm joined by my co-host and partner in crime, Andreas Deno. What a Monday, Andreas. How's your day been? um you know when i woke up this morning uh i was about to hang myself honestly you know it was such uh an open to basically the nasdaq futures market and you know a couple of hours later i'm i'm starting to sort of grasp what this story is all about uh and i'm a little bit more comfortable now. Overall, this DeepSeek NVIDIA story is incredibly interesting also from a macro perspective.

2:35But what's a little bit amusing is that right about everything that we know right now, we also knew on Friday. So, you know, something happened over this weekend. Maybe people actually got the time to read through the research paper on DeepSeek. You know, because we had internal discussions on the topic in our fund on Friday. And, you know, it was a big thing, but we were like, okay, we were like, you know, let's address this when it becomes relevant. And, oh boy, it's relevant now. So, yeah, it's been a crazy day. You can't ignore that. We're looking at a route in tech stocks, obviously the NASDAQ down over 3%, especially both NVIDIA and Meta, Alphabet, all of them taking quite the beating.

3:24So Andres, you just recorded a flash update with our great colleague Alex. It should be out in a few hours on the pro macro side. So for a much deeper dive also into some of the specifics of DeepSeek, you can go have a look at that. I'm really looking forward to that. But we'll try and cover some of the macro aspects of this and what to make going forward here. So Andres, just to sum up for those who've been living under a rock so far today or maybe just getting up a little late here. What's the story? So DeepSeek, a Chinese AI, released recently. I think the research paper was out Wednesday last week.

4:10All of a sudden pulled the rock from under the technology space, especially the semiconductor space in the US and in Taiwan this morning. And I guess the short version of a much longer story is that DeepSeek is incredibly more efficient than OpenAI, for example, right? So look at it this way. It delivers, say, 80-90 % of what JetGPT does at a much, much lower level of computational power. And is that a big thing? Well, you know, initially, yes, because obviously from a hardware perspective, right, if you need fewer GPUs to run more models, that could be a short-term issue for NVIDIA, right? and we obviously know that it is priced to some sort of perfection now, whatever you call it.

5:09We have expectations of a doubling of the top line this year and probably around 80 % on top of that next year. At least we had those expectations before today. And for a stock that is so dependent on its growth trajectory, even one or two quarters with disappointments will probably be enough to alter the trend substantially. Having said that, I guess the more medium-term story is very compelling here as well, because if DeepSeek and the technology behind it is indeed a game-changer, and most people I talk to think that it is, it is also a game-changer for medium-term inflation. It is a game-changer for medium-term demand for semiconductors.

6:03It's a game changer for the entry barriers, for large language models. You know, it's a game changer for right about everything and it all points in the direction of us reaching some sort of singularity earlier than expected. And possibly also electricity demand. Yeah, yeah, yeah. Yeah, it's a good point, Miguel, because if you look at nuclear stocks today and utilities, they're not doing well because this obvious link between, okay, we need to use much more power. We need to have small modular reactors close to data centers. That story is also sidelined to some extent by this story today. Hi, Raoul here.

6:43Listen, I think we've got until 2030 before the economic singularity arrives. Now it might not be the exact date, but it's around then. So we have about six years to figure out how to unfuck our future. I've put together a report to help you called Prepare for 2030. it's going to help you take the first steps in that journey to make sure you're secure past 2030. So just click on the link below and start your journey now. But I'd like to show you a meme that I found early this morning. I love these build shot beams. Yeah. Yeah. You know, I love them as well. And I think, I think this take is right.

7:22Yeah. So, you know, and as per usual, these build shots, right there, they're taking it to sort of the edge of what's fair, right? Yeah, yeah. But in case the point here is a lot of people talk about, okay, this is a problem for NVIDIA this quarter, next, because the big clients, Microsoft, Alphabet, et cetera, will not buy as many GPUs as they can see that they can basically thrive with fewer GPUs, et cetera, right? I think there's some merit to that story, but the bigger story is that entry barriers will be lowered substantially. And this is, by the way, a story that we always see with software, right?

8:02And now China is involved. Involving China in, right, about anything means that it's a race to zero, right, and costs. And I think this is a classic example of the same, right? And if you lower the entry barriers, you lower the costs of producing, basically by increasing the efficiency, the demand for the hardware underlying it will actually increase not decrease um exactly that's the end game in my opinion uh what happens in between that end game uh and now is probably that nvidia will take a drop and then re-accelerate um timing wise i think it's tricky to find that bottom right now even though it seems like we've you know at least judging from the price action And it seems like at least the first wave is over here, but let's see.

8:52Yeah. I always try to move to the left of these bill charts. Keep to the simple analysis. Don't fuck this up. I think that's also what we're going to tweet today. So extremely interesting, Andreas, here. I just want to touch on the fact that DeepSeek is coming out of China because I think that's very, very relevant as well. This is in many media, many analysts are pointing to this as a Sputnik moment. Let's just remember the Sputnik was the first satellite to orbit the Earth. Earth was launched by the Russians, by the Soviet Union, and it caused the U.S. to invest massively in the space race. If this is viewed as a Sputnik moment, this should provoke even larger investments into AI from within the U.S., from the U.S.

9:37government as well. And I think that might very well be the case, because remember, this AI tech is obviously important for the tech sector, but it's equally important for the defense industries of both China and the US. So if this is viewed as, wow, the Chinese are leapfrogging us on AI, then we simply have to invest more into this. So that's one angle of it. So Andreas. Have you ever wanted to trade Bitcoin but haven't dared try? With Plus500 Futures, you can trade crypto without the hassle of opening a wallet. With just a few clicks, you can register and start practicing with their free and unlimited demo.

10:13See a trading opportunity? You'll be able to trade it in just two clicks. Feel ready? You can move to real money with as little as$100 once your account is approved. And the great thing is that in addition to crypto, Plus500 gives you access to a wide range of instruments. S &P 500, NASDAQ, gas, and much more. Explore equity indices, energy, metals, Forex, and beyond. With a simple and intuitive platform, you could trade anytime, anywhere. Experience the fast, accessible futures trading you've been waiting for with Plus500. With over 20 years of experience, Plus500 is your gateway to the markets.

10:46Visit us.plus500.com to learn more. Trading in futures involves the risk of loss and is not suitable for everyone. Not all applicants will qualify. Plus500, it's trading with a plus. I wanted to add one thing to this. It's not only Chinese, it's a spin out of a Chinese hedge fund. and you know I've had long discussions with hedge fund counterparts today whether to actually trust this story fully because you know let's assume that high flyers the hedge fund behind this ran some sort of negative or bearish position on Nvidia before throwing this news out I mean you know it's a very very weird incentive structure to have an AI company and a hedge fund at the same time at least you need to be aware of that incentive structure when you read this so I just wanted to get that out there because, you know, it's not irrelevant to know, at least.

11:42I don't, I cannot prove anything. I don't have any information on it. Just want to stress that. I just look at the incentive structure and I find it fishy. Let me put it like that. I agree completely. There are some other points too. Obviously, we've all seen the tweets of DeepSeek refusing to answer questions, both related to whether Xi Jinping is related to Winnie the Pooh and all sorts of sensitive Chinese questions. Of course, it refuses to answer these. And there's also a point to this being sort of a data grab. I think that's an interesting angle because, but at the end of the day, one thing is hardware, one thing is software, is the data that you need to continue to work on these models.

12:22And if you have the best model, that's where people are going to go with all the data, with all their prompts. And that is going to be a competitive factor as well. So to put out a model that people perceive as being better than OpenAI's model or Claude or whatever you have, might be very, very powerful as well. So Andreas, let's try and understand some of the market logics here because, I mean, it shouldn't be a surprise that we're seeing innovation in AI space. Why such a heavy drop today? I think, you know, looking at NVIDIA first, right? I think it's clear that it's an equity case that needs growth quarter by quarter.

13:05And even though the medium-term prospects are pretty solid on the back of this. It's an issue for a growth case to have one or two disappointing quarters in a row. So should we get that, get out, right? That's kind of the short version of why it matters so much. The market is incredibly bad at looking beyond what's in the next quarter or two. And even though we can sit here and agree that the medium term is probably even better than a week ago, So that will be tricky to navigate until the growth story is back quarter to quarter. So that's why it matters a whole lot. Then, you know, looking at the spillovers to US fixed income to the US dollar, I find the ramifications maybe even more interesting from a macro perspective because, you know, all trend lines are broken now in the strong dollar.

14:01and it's a very easy sell to say that this is a dollar negative story because you know flow wise the dollar has been thriving on the back of equity flows pointing only in one direction that's basically towards silicon valley right and if we get some sort of pause in that story it will allow the positioning to unwind quickly in the dollar i think dollar yen looks incredibly compelling as a macro case. The Japanese yen obviously being a risk-off currency as well, but also given that dollar yen trades, maybe 10 index points or 10 big figures above its fair value when you look at interest rate spreads between the US and Japan.

14:49So I think that's a compelling story. I think we kind of needed a trigger to really sell the dollar in big size. And maybe we've gotten that exact trigger today, obviously also related to lower bond yields in the US. Very interesting. I was a bit surprised just to round off this topic, Andreas, that it didn't take more than a storyline like this to rattle all this tech investment. Is this a case of all these tech stocks being priced in at such multiples, which, as you mentioned, They're pricing in almost exponential growth that it takes so little to throw off the curve. That makes investors more nervous.

15:30Is that what we're looking at or am I overreading this? No, no. I think that's exactly what we're looking at. It was the same thing that happened to Tesla back in 22, 23. You simply need to deliver on the priced-in growth, also near term, to justify the multiples. And that's why we'll have a rocky road ahead. You know, we've been banging the drum on buying equal weight S &P in this Trump era rather than Nasdaq. And so far, we've been 100 % right on that. It is incredibly difficult to time the price action in Nasdaq, both on the up and on the down. I'm not even sure that I really want to try because, you know, the market has been incredibly schizophrenic since the December press from Powell.

16:17You know, we've had these nasty drawdowns in Nasdaq. Then all of a sudden, we're back. I like not to be involved when the market is behaving like that. I consider it a better choice to be in the equal weight S &P. And it's been outperforming Nasdaq for a couple of months in a row now. Go to the left side of the bill chart. That's a message for now. So, Andreas, finally a week where Trump isn't the top topic here, although I just want to touch upon the whole club here. Maybe he'll end up being the center of attention in this AI case as well, because we obviously know that the Stargate project was launched, was it last Wednesday as well, right?

16:59It was more or less around the same timing of the research paper from DeepSeek. It sounded like Trump was like personally vested in that Stargate story as well. Then we had Elon going out on X, like trying to question whether they had the financing and all that. it's obviously something that's on the radar in this administration and I think it was late as last week we talked about the prospects of doing a tech deal between US and China not necessarily sure that that tech deal has become a whole lot easier after this and maybe Trump is one or two hours away from tweeting something about this that would be a major game changer again yeah exactly it's just he probably needs to comment on this.

17:50I would go as far as saying. Absolutely. And it seems like, while it seems like Elon is sliding a little bit in the internal hierarchy of the Trump administration, why don't you just buy this whole deep seek thing and get himself right back in the front seat of the Trump car? I don't know. Trump did have a major win over this weekend, the standoff with Columbia. I think this was a demonstration to the analysis that we've laid out over the past months, Andres, that of course Trump is serious about terrorists, but mostly for the point of being serious. Like people need to take this serious as a threat.

18:31And the Colombian government absolutely did. So long story short, the Colombian government refused to accept or to allow a couple of planes full of illegal immigrants expelled from the US to land in Colombia. This infuriated Trump, who then retaliated with, I think it was 25 % tariffs that would rise to 50 % in a week. And then within hours, the Colombian government folded, very much demonstrating, one, that this is a viable strategy for Trump to gain what he wants, at least short term. He's not building any long-term friendships here. And also, too, demonstrating that these suggested tariffs, he has to do them very specifically on single countries, not entire regions or globally.

19:17That's where they're the most efficient because they hurt Colombia. They will hurt Colombia much more than they will hurt the U.S. And, yeah, great effect out of that. We might see that weapon used even further down the road, perhaps not in China. It seems like China are slipping out of that one. But a big win for Trump, essentially, at least in the short term. Yeah. But maybe, Mikkel, I don't know on the question on tariffs and China. He said as much last week that he kind of preferred not to use them, even on China, right? So if they do deals, you'll not use them. The question is just how they handle this deep seek stuff.

19:58could be a game changer for those negotiations. But on the other hand, right, is DeepSik, could that become too powerful for Xi, right? And, you know, that's another question that we cannot answer at this point. You know, he basically made a power grab on Alibaba in 21, I think it was, right? So, I mean, could this be something that is too powerful for Xi's taste as well? You don't really know that, right? So lots of questions right now. Again, and I want to stress that we had a great discussion with our CTO, Alex Milo, on the technical ramifications of DeepSeek, why it matters for open AI, why it matters for NVIDIA, et cetera.

20:43And you can watch that in the pro macro session on Real Vision. It requires you becoming a member. Absolutely, you should do that. So Andreas, we try to sort of tune out of all the current noise, all the Trump noise in this final part of the show. You had in your weekly stand-on signals post on Sunday, you had some very interesting indicators on the economic activity in the US. Could you just explain a little bit this chart on withheld taxes? I think it was very, very telling. Could you just give us some insight into that and what that means for positioning? Yeah, so the reason why, and we basically intend on doing that every week in this show, maybe like try to cut through all of the noise to find bets that have strong embedded characteristics in a very noisy macro and geopolitical world as we have right now.

21:34And, you know, one of the things that I've noticed basically since, as you can see on the chart, November or thereabout, is that the amount of taxes withheld on behalf of employees in the US is rising quite substantially. So why is that an important indicator for us live? Well, it's one of the time series components of our now costing model in the US, since it gives you a daily flavor of the labor market activity, basically, right? And, you know, we had a stronger non-farm payrolls report than most people anticipated, the first one that was released this year. And I think the answer is found right here.

22:16You know, you cannot expect withheld taxes to pick up unless there's a pickup in hiring, right? Maybe if wages rise a lot, but we either need to see wage growth or hiring for these withheld taxes to increase. It's as simple as that. So I think it's a pretty strong sign that we've actually seen a hiring pickup since the election. And again, something that, you know, it speaks against having a negative view on the US from a like fundamental macro perspective, right? We can have niche stories as this one on AI and semiconductors. But if you buy the equal weight S &P based on this, I think you're okay, right?

23:03Because it seems like there's, you know, momentum in labor markets and in the, you know, spending gauges and all that in the US still. Very interesting. I just wanted to touch upon this. You're obviously contributing greatly to this number of flights pointing to great consumption also. yeah you know um in my opinion flight data is the best gauge of discretionary consumer spending right because and i think you'll agree right miguel if if you struggle to pay your bills you're not booking a flight to japan as a tourist right you know it's it's one of the easiest expenses to cut off your budget and businesses as well yeah yeah also for businesses right it It happens straight away in a downturn, right?

23:56And we see this flight data picking up again. So I think that's another strong sign that discretionary spending is actually on the up. And, you know, last week we went to the Middle East. I'm going to the U.S. this week, Singapore soon, right? You know, so we're contributing, yes. Yeah, we'll have to ensure that our carbon emission is not too crazy, right, for our ESG reporting and the company, Miguel. But anyway... That's done. ESG is done, isn't it? At least in the U.S. it seems to be done. It's certainly not done where we're from. It's so laugh. Yeah, and I had a laugh when I saw Christine Lagarde saying that maybe a lot of people will leave the U.S.

24:36because of all of the turmoil created by Trump. And, you know, then I tweeted, well, at least a lot of ESG officials will be open to new work, right? Because it just seems like ESG is done, DEI is done, because Trump has basically told both private and public companies to get over with it, right? Stop it. But we are not there in Europe, not even close. Let me put it like that. No, one thing is Trump. Another thing is simply sort of the dynamic, the societal development. I think it's a topic that's getting a little less relevant right now. It's going to find a natural level, perhaps, of importance.

25:15So we're seeing all the major businesses scaling it down, major politicians scaling it down. As I mentioned before, I think the moment where Alexandria Ocasio-Cortez removed her pronouns from her ex-account, that was a very, very big moment for the anti-woke movement, obviously. Okay, Andreas, a crazy day here. Any final thoughts for the show? Well, you know, I think you need to be very agile if you're involved in the semiconductor slash stack trade. I think there is merit to the story that we have an issue for growth targets of hardware sales say over the next one, two quarters based on this let's assume that you entered the C level of either Microsoft OpenAI Alphabet, etc.

26:10having received the news that they've more or less proven and they've basically proven that they can run large language models with less computational power in China. I think the first thing I would demand as a board member would be to say, okay, we need to do that before we buy more GPUs. Basically, do that first, and then we can buy some more GPUs. But by the end of the day, it is disinflationary because as an end consumer of chat GBT, I would also demand the price to drop now. because more alternatives, less entry barriers, all of that. It's disinflationary. It's incredibly bullish for the demand for GPUs over time and will reach singularity before forecasted one or two weeks ago.

27:01So, you know, I'm kind of torn between the very, very near term and the structural outlook here. So if you're one of those involved in markets with a long-term horizon, I think you should be happy about what happened today So Andreas, finally I just want to touch, we've had some audience questions here as I was looking at things this morning I was looking at our strategy portfolio, my own portfolio I was thinking, oh well at least crypto is safe from this Yeah Well not, not at all Why does this affect crypto? How do you think this will affect crypto? It's a sentiment thing It's a sentiment thing I don't think there is you know to my knowledge there is no like crystal clear and direct links between the two stories so I think it's more of a sentiment thing and we've also seen some sort of consolidation later in the day here so you know by the end of the day not a biggie you know I'll still be focused on the next moves from the Trump admin on this rather than this story great stuff andreas i think we will round it off at that thank you very much all of you out there for tuning into our macro monday show it's a real pleasure to host these every week remember that you can check into an even deeper dive into the deep sea tech and or case and and what this means for tech if you're a pro macro member if you're not you should try that out absolutely it includes our shows with role as well and a lot of other great content thank you so much for joining andreas We'll be back next week.

28:39Thank you all for looking in out there. Have a good one.

29:08You won't want to miss. With over 500 side events, Dubai will be the industry's focal point and the place to be for everyone in crypto this April. Grab your tickets at Dubai.Token2049.com with promo code Real Vision for an exclusive 10 % off, only while tickets last.

29:26Consensus Hong Kong 2025 is where the global crypto community converges to shape the next era of Web 3. From February 18th through the 20th, Hong Kong becomes the meeting point for leaders across finance, technology and digital assets. This isn't just a conference. It's where deals are made, partnerships are forged and new opportunities emerge. Consensus features exclusive networking lounges, expert led sessions and invaluable insights from top industry voices. Whether you're expanding your network, building your brand or closing your next big deal. This is the event that moves markets. Visit coindesk.com forward slash consensus dash HK to secure your spot and use Real Vision 15 for 15 % off.