Commentary

February 2025

Equity and Fixed Income Strategy

Had You Even Heard About DeepSeek Before Last Week?

Stéphane Rochon, CFA, Equity Strategist; Richard Belley, CFA, Fixed Income Analyst; Russ Visch, CMT, Technical Analyst; Eric Yoo, Associate; Ernad Sijercic, Associate

Be honest now!
Lost in all the tariff talk is a potential seismic shift in AI power dynamics. China’s DeepSeek produced an OpenAI competitor, DeepSeek-R1, at a fraction of the price. They reportedly spent less than $6MM “training” the model – excluding hardware and prior training costs but still way cheaper than competitors – for a free application that is on par (or in some cases outperforms) OpenAI, Meta and Google’s top models1 on many metrics. Stocks related to the AI theme fell sharply on the news with highfliers such as Nvidia and Broadcom down 17% in a single trading session. Not to be outdone, Chinese e-commerce giant Alibaba released its own model the very next day, claiming it outperformed all competitors. But not all is lost. On the contrary, while investors need to be very selective, we believe the broader implications are quite positive from a macro perspective. In fact, we believe that mass adoption of AI will not only increase global economic growth, but will also boost labour productivity which has positive implications for corporate profit margins and acts to restrain inflationary pressures. This is one of the reasons we continue to be bullish on equity markets despite the impressive secular bull market we have enjoyed for years. The key investment takeaway for us is that the best equity opportunities will transition from the compute arms dealers to industries who can leverage the great efficiency provided by AI (e.g., software app developers, power producers to feed data centers, Pharma, Industrials). More on this below.


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Do not hesitate to give either of us a call at 416 359-7565 or 416-359-7564 or email Sharon Kubicek or Alisa Carli if you have any questions respecting your portfolio and the prevailing investment, economic and political issues at play today.

Sharon and Alisa