Chinese Moonshot AI unsettles US tech

00:00:00: A Chinese AI startup called Moonshot AI rattled global markets after unveiling its latest model that reportedly rivals the latest offerings from OpenAI and Anthropik at a fraction of the cost.

00:00:13: The announcement came on Friday, and on top an already fragile backdrop marked by disappointing market reactions to seller chip earnings rising oil prices due higher bond yields and uncertainties regarding the AI valuations.

00:00:29: Investors are today increasing, they're questioning whether the lofty valuations across U.S.-AI ecosystem can withstand grabbing competition from lower-cost Chinese models?

00:00:39: And whether it's a good idea to start packing and move towards China!

00:00:43: So welcome to Swisscoats daily Market Talk, I'm Ipekos Kardashian.

00:00:48: It's Monday the twentieth of July.

00:00:50: we will talk about The Great Repricing Of AI and more.

00:00:54: but before We do And as always please keep in mind that opinions are my own.

00:00:59: This is not financial advice.

00:01:09: It was a real irony on Friday, while SpaceX failed to launch its latest rocket after multiple engine failures late last week.

00:01:17: China's Moonshot AI pulled off a moonshot of his own!

00:01:22: The startup on Friday unveiled this latest AI model called Kimi K-III Model which is an open source AI model and it actually shook the US markets because one, Kimi k-III beat Anthropics Fable V and OpenAI's GPT-Five point six sole models in front end coding test by AI Evaluator Arena.

00:01:42: And two, the model performed better than Anthropics Opus-Four point eight which was a flagship model before Fable five while costing around forty percent less.

00:01:52: Moonshot is reported looking to release this open weight model on July twenty seventh yes in seven days and it's also preparing for an IPO into coming months in Hong Kong.

00:02:03: Then why does it matter for the global financial markets?

00:02:06: Well, It matters a lot because US stock markets especially have been carried higher by a handful of technology stocks.

00:02:13: The massive AI investment plans around two main startups that are open AI and Anthropaik And these investments has been equating positively across chip makers cloud data center providers and broader supply chain including energy raw materials, constructors construction firms and also banks.

00:02:34: yes banks are also helping to put together all this financing the financing of billions of us dollars worth of capital pouring into the industry.

00:02:43: remember The world's biggest technology companies have made tens of billion dollars worth deals with either open ai or anthropic under the form of direct investment or strategic partnerships in exchange for multi-year contracts.

00:02:58: I was referring to either Buying chips or buying computing power from these companies.

00:03:04: So it is a big deal and both open AI anthropic became trailing dollars.

00:03:08: startups are almost planning to go public in the coming months In the US unless of course, a market turmoil delays These plans and well The huge valuations for this start-ups based on assumption that money will flow From outside the current technology body circle into the circle.

00:03:26: the problem Is?

00:03:27: It has said that Chinese AI models could cost up to a hundred times less that open AI and Anthropig, And many businesses do not necessarily need the most advanced AI models To run their day-to-day business.

00:03:41: Take Uber for example That recently announced to limit The token users among its employees Because it became just too costly.

00:03:48: Well, this company.

00:03:49: This business could very well run on a model that is not necessarily the best in discovering new medicines.

00:03:54: I mean you see what i'm here right.

00:03:56: and of course The fact that these cheaper Chinese models are open source make them easier to adopt.

00:04:02: then the rest Is textbook economics.

00:04:03: basically lower demand for us models should oblige res model providers so lower their own prices To become more competitive and lower prices with compressive revenue Expectations full of these companies making today's eye-watering valuations near or at one trillion US dollars for both open AI and anthropic increasingly difficult to justify.

00:04:27: And while the mismatch is already striking, right?

00:04:30: OpenAI was generating roughly twenty five billion US dollars worth of revenue in annualized terms against eight hundred fifty billion US dollar worth of valuation While Anthropic is on track for around forty seven billion U.S.

00:04:43: dollars in annualize revenue despite being valued as nearly one trillion US dollars.

00:04:49: That means investors are paying roughly thirty four times revenue for open AI and around twenty one time's revenue for anthropic multiples.

00:04:56: that leave very, very little room indeed for pricing pressure or competitive disruption for these companies.

00:05:03: And again coming back to the circle because this two companies already epicenter of the U S A I circle any reevaluation?

00:05:11: Any adjustment to devaluation to downside could stand shockwave through chip makers data center in cloud providers and to the broader supply chain, including constructors of these data centers.

00:05:22: And eventually the banks too.

00:05:25: that by the way printed record results last quarter.

00:05:29: remember thanks for stock and bond issuance that put the finances AI economy.

00:05:36: so yes the moonshirt ai's moonshot came at a bad timing earlier last week.

00:05:41: remember TSMC announced is seventy seven percent profit growth But the stock closed session following that earnings announcement more than seven percent down.

00:05:51: And I was really, really bad indication on how investors will be feeling regarding the rest of the earning season when XMI conductor ETF on Friday fell more then two percent below his fifth today.

00:06:03: moving average.

00:06:04: SK hynix is down this morning in Korea by another to person at a time i'm talking here somehow trying to recover its earlier losses while The Korean Cosby Index starts week with a full percent sell-off.

00:06:16: It was close last Friday, remember and making it painful to catch up this Monday.

00:06:20: And on the flip side of this trade, Oli Baborelli's won him five percent this month in Hong Kong after launching his preview for his own Quen model which is reportedly comparable.

00:06:33: Second, only two.

00:06:34: Anthropics fable five according to Bloomberg.

00:06:37: Brother Hunseng index is up by more than two percent this morning with chip makers and technology names leading the gains elsewhere.

00:06:44: now as that futures look calmer This morning they're even slightly higher at a time I'm talking here into the weekly opening bell.

00:06:52: while The Broader macrocon set-up was still deteriorating By today US for example opened the week near eighty five dollar per barrel level While brand creators trading near the US dollar per barrel level this morning on news at Iranian strikes targeted Kuwaiti energy infrastructure and desalination plans over weekend.

00:07:13: But not only.

00:07:15: Because the Ukrainian attacks on Russian energy infrastructure is also tightening supply.

00:07:19: since months Now, data is scarce and Russia's quite opaque in terms of data but the IEA recently reported that Since August twenty-five at least hundred strikes had Russian refineries with a pace of attack increasing in recent months.

00:07:35: In June alone they said Atleast ten strikes on refinerys were reported And almost every large refinery Western part of Russia has been hit by the Ukrainian drones, obliging Russia to restrict and curb energy exports.

00:07:51: To make sure that they've got enough energy at home!

00:08:12: obsolete.

00:08:12: Interestingly though, in the FX markets The US dollar remains muted against most majors with upside risk prevailing however into another geopolitically tense week while gold sits on uncomfortable four thousand dollars per ounce support right now.

00:08:28: The wave will bring a number of economic data and technology earnings under the spotlight, and volatility would certainly remain high due to all new pieces that come into this puzzle.

00:08:39: And we could eventually see further market pullback in U.S.-European markets basically on the back of rising geopolitical tensions, rising oil prices, rising inflation expectations... ...and also potentially unsatisfactory earnings from some technological companies!

00:08:54: If investors keep their focus on AR spending rather than earnings growth.

00:09:00: So the question is, whether fresh Middle East tensions could ramp up the renewed interest in China's ecosystem provided that lower-valley Chinese technology names are not only catching U.S.

00:09:14: peers' performance and beating them in terms of pricing but also because China has proved very resilient to the latest Iranian-led energy shock.

00:09:29: Time will tell.

00:09:30: So I'll leave it here with this question and let you tell me in the comments below whether You would be comfortable going back to Chinese equities or going into chinese equities if you haven't done so In the past, i'm Yipega Skardishkaya And thank you for joining Me!

00:09:44: Thank you For all your beautiful and supportive Comments on these

00:09:47: videos!!

00:09:48: I hope This episode of market talk has also been helpful & It's been insightful To YOU!

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