Motley Fool Money: Episode Summary – "DeepSeek Disrupts, Big Tech Responds"
Introduction
In the January 31, 2025 episode of Motley Fool Money, hosts Dylan Lewis, Ricky Mulvey, and Mary Long delve into a significant market upheaval triggered by advancements in artificial intelligence (AI). The episode primarily focuses on the emergence of DeepSeek, a Chinese AI chatbot developer, and the subsequent reactions from major technology companies. Additionally, the hosts explore earnings reports from tech giants like Microsoft, Meta, Apple, Tesla, and Starbucks, and discuss developments in the payments sector with MasterCard and Visa. The episode concludes with stock recommendations from analysts Jason Moser and Asit Sharma.
DeepSeek’s Market Disruption
The episode opens with Dylan Lewis highlighting DeepSeek's impact on the AI landscape. DeepSeek, a Chinese AI company, introduced the R1 model, which rivals OpenAI's GPT-4 in performance but at significantly lower costs. This revelation sparked a massive reassessment in the market, leading to substantial losses in market capitalization for companies like Nvidia and other big tech players, as well as energy stocks due to concerns over reduced energy demands.
Notable Quote:
“DeepSeek is a company based in China, a sort of scrappy, ambitious large language model creator...maybe not all of this is quite the savings that they're purporting, but it's legit.” — Asit Sharma [01:39]
Technological Innovations and Market Reactions
Asit Sharma explains DeepSeek's innovative approaches, such as activating fewer parameters in their models to achieve efficiency and cost-effectiveness. The announcement led to a "nuclear chain of reactions," as the AI community questioned the necessity of expensive GPU investments if cheaper alternatives like DeepSeek's models prove viable.
Jason Moser adds that the AI field remains nascent, emphasizing the importance of reliability and trust in new AI engines. He references a study by News Guard, which found DeepSeek's chatbot achieved only 17% accuracy in delivering news, raising concerns about the viability and trustworthiness of such technologies.
Notable Quote:
“It just seems like it was very headline driven emotional reaction to the market that we probably need to learn more about before we make any kind of a definitive decision.” — Jason Moser [04:11]
Big Tech’s Response to DeepSeek
The hosts transition to how major tech companies are responding to DeepSeek's disruption, starting with ASML, a Dutch chip equipment manufacturer.
ASML’s Position:
Asit Sharma discusses ASML's strong quarterly performance, with a 24% revenue growth and a doubled outlook for bookings, signaling continued investment in high-end machinery that supports AI infrastructure. ASML's management announced the cessation of booking guidance to mitigate volatility, reiterating AI as a key growth driver.
Notable Quote:
“They have a strong future in this business and results were, as I said before, just solid what you'd expect out of Microsoft.” — Asit Sharma [07:19]
Microsoft’s Continued Investment:
Asit Sharma highlights Microsoft's robust financial results, including a 12% revenue increase to nearly $70 billion and substantial capital expenditure in AI. Microsoft's commitment to being an open platform ensures flexibility in adopting the best available AI models and hardware solutions.
Notable Quote:
“We're going to be an open platform. So as we build out all these data centers, if the best model is DeepSeek’s, we'll let people use that.” — Asit Sharma [11:50]
Meta’s Strategic Investments:
Jason Moser examines Meta's strong quarterly performance with a 21% revenue increase and a 50% growth in earnings per share. Despite heavy investments in AI and Reality Labs, which continues to incur significant losses, the market remains optimistic due to Meta's expansive user base and potential future revenues from AI and social platforms like Threads.
Notable Quote:
“Reality Labs continues to just incinerate money... the AI investments probably make a little bit more sense at this point.” — Jason Moser [13:04]
Apple’s Steady Performance:
Asit Sharma reviews Apple's record sales and earnings, noting steady growth in services but challenges in iPhone sales in China. Apple's engineers contributed to the analysis of DeepSeek's R1 model, indicating their active role in the evolving AI landscape.
Notable Quote:
“It's another boring stodgy payments company that just continues to flex its massive network effect muscles." — Jason Moser [31:54]
Tesla’s Earnings Report
The discussion shifts to Tesla's latest earnings, where despite a remarkable stock performance over the past year, the company faces challenges in automotive revenue and margin compression. However, Tesla's energy generation and storage segments show significant growth, contributing to overall profitability.
Notable Quote:
“Electric vehicles' cost has been lowered, but they need demand to be there.” — Asit Sharma [22:26]
Elon Musk's ambitious goals for affordable models, full self-driving capabilities, and the upcoming robo-taxi service were also highlighted, positioning Tesla not just as a car company but as a multifaceted technology leader.
Notable Quote:
“There is a path where Tesla will or can be worth more than the next top five companies combined.” — Jason Moser [23:43]
Starbucks’ Performance Under New Leadership
Jason Moser and Asit Sharma analyze Starbucks' first quarterly report under CEO Brian Niccol. While revenue remained flat and active memberships saw minimal growth, the company is shifting towards premium pricing by reducing discount-driven offers and simplifying its menu. The new strategy aims to enhance the customer experience and empower baristas, aligning with Niccol's vision of "Back to Starbucks."
Notable Quote:
“He's trying to give you a premium experience, premium product and they want to demand a little bit more premium pricing.” — Jason Moser [25:45]
MasterCard and Visa’s Strong Performance
The episode covers robust earnings from payment giants MasterCard and Visa, driven by continued consumer spending and strategic acquisitions to bolster their networks. MasterCard's acquisition of a cybersecurity firm enhances its fraud prevention capabilities, while Visa's partnership with Elon Musk's X app aims to integrate financial services into the social media platform.
Notable Quotes:
“They can show that their network is safer because they have better fraud prevention tools.” — Asit Sharma [30:44]
“It's just how money is moved more and more digitally and more and more through these networks.” — Jason Moser [31:59]
Stock Recommendations
The episode concludes with analysts Jason Moser and Asit Sharma sharing their stock picks for the week.
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UPS (Ticker: UPS):
- Jason Moser points out UPS's strategic decision to reduce its reliance on Amazon by cutting volume by 50% by mid-2026. This move aims to enhance profitability despite short-term revenue impacts.
- Notable Quote:
“Large customer risk is always something to worry about and this move is meant to address that risk and ultimately tamp it down.” — Jason Moser [35:22]
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ServiceNow (Ticker: NOW):
- Asit Sharma expresses interest in ServiceNow despite a recent stock sell-off due to missed analyst projections. He praises the company's strong relationships with Fortune 500 clients and views the price dip as an opportunity to acquire more shares.
- Notable Quote:
“Near term turbulence can equal long term value for investors who are patient.” — Asit Sharma [38:29]
Conclusion
The January 31, 2025 episode of Motley Fool Money provides an in-depth analysis of the shifting AI landscape influenced by DeepSeek's advancements and the strategic responses from major tech companies. Additionally, the episode offers valuable insights into the earnings reports of prominent corporations and presents thoughtful stock recommendations. Listeners gain a comprehensive understanding of the current market dynamics and potential investment opportunities.
Notable Quotes Recap:
- Asit Sharma on DeepSeek's legitimacy: “[...] maybe not all of this is quite the savings that they're purporting, but it's legit.” [01:39]
- Jason Moser on AI reliability: “[...] what we are seeing is some time to really kind of perfect this technology.” [04:11]
- Asit Sharma on Microsoft’s strategy: “We're going to be an open platform. So as we build out all these data centers, if the best model is DeepSeek’s, we'll let people use that.” [11:50]
- Jason Moser on Tesla’s future: “There is a path where Tesla will or can be worth more than the next top five companies combined.” [23:43]
- Jason Moser on Starbucks' strategy: “[...] they are trying to give you a premium experience, premium product and they want to demand a little bit more premium pricing.” [25:45]
- Asit Sharma on MasterCard’s cybersecurity: “They can show that their network is safer because they have better fraud prevention tools.” [30:44]
- Jason Moser on Visa's network: “It's just how money is moved more and more digitally and more and more through these networks.” [31:59]
This comprehensive summary captures the essence of the podcast episode, highlighting key discussions, insights, and conclusions drawn by the hosts and analysts.