➡ The value of AI stocks has changed drastically due to the release of an open-source AI model by China’s DeepSeek. This has forced investors to rethink their strategies. However, this isn’t the end of AI investing, but rather a shift in the business model. Understanding these changes can help investors avoid losses and position themselves for future gains in the AI market.
➡ The way we evaluate AI companies is changing due to the rise of open-source models, which are often superior and free. This shift is causing a reevaluation of the entire AI stock market. The value now lies not in the base layer of AI, but in the specific applications built on top of these open-source models. This change is also causing a significant shift in capital, with open-source projects now outperforming companies that try to protect their proprietary models.
➡ The world is shifting towards open source and decentralization, with China potentially outpacing the U.S. in tech investments. This could lead to a shift in global capital flow, affecting investment strategies. The future of AI lies in high-value applications and the convergence of Bitcoin, AI, and open source. However, caution is advised in passive investing due to potential market volatility and the need to be selective in investments, focusing on the convergence of these three elements.

AI stocks have been on fire, but most investors don’t realize they’re walking into a trap. Now, the entire market got a wake-up call when China’s DeepSeek released an open-source AI model that shocked everyone. Overnight, the way that investors value stocks, AI stocks, and even indexes has completely changed. So if you’re holding AI stocks, you need to hear this before it’s too late. But of course, don’t panic. Look, this isn’t the end of AI investing. In fact, there’s a massive opportunity if you know where to look. So in this video, I’m going to break down why the AI market is breaking down right now.

How open-source models like DeepSeek is forcing a total rethink of AI stocks and just stocks overall in the valuations. And we’re going to talk about where the smart money is moving next and how to position yourself for the biggest gains in the AI next wave. Real quick, I’m Mark Moss. I’ve built and exited multiple tech companies. I’ve invested through several boom and bust cycles. Today, I’m a partner at a leading Bitcoin venture capital fund called the Bitcoin Opportunity Fund. I also write the Quantum Wave Investment Report, where I help investors navigate the biggest shifts in tech and money.

And I make these videos to give you the insights that we’re using so you can navigate and profit from these shifts as well. So let’s go. All right, we’re jumping right into it. We’re talking about how AI investing is breaking down. Now listen, look, this is not a doom and gloom video. AI is massively transformative, is going to create massive efficiencies, and it is changing the world. I use it every day. I’ve been making money, investing in it. But if you don’t understand the nuances of how this shifts, you could lose money. So let’s break this down.

Okay, we know if you’ve been living under rock, that AI has completely skyrocketed really from about 2022 to 2023. It’s not that old, right? Open AI stormed the scene was that November of 2022. So all 2023 and 2024, it has been blowing up. It’s the darling, Wall Street loves that every investment newsletter is talking about it. And it’s like all in, right? Except for the problem is that the way technology works, is it moves through different cycles. And so what we’re seeing is the AI business model is changing really rapidly, right? This technology is moving so much faster than previous technology cycles in the past.

But if you understand that, which I’m going to break down for you, you can see that the model shifting. So if you’re still investing like you were in 22 and 20 or 23 and 24, you’re gonna be losing money. And now that we’ll be losing money, you’ll be missing out on the massive gains that we have. Now we can look at historical parallels, the dot com boom and bust, we can look at the crypto sort of boom and bust, and we can understand the fractals, we can understand how those markets evolved, we’ll compare it to history and technology to understand that.

And we can understand that the AI stocks that most people think about today, open AI being the leader, of course, Google with their Gemini and so forth, they’re not really monopolies. And really what it’s highlighted is that valuation is only a concern when the underlying fundamentals change. And that’s the problem. Those fundamentals are changing. Okay, so let’s let’s understand this. So you know how to navigate the cycles. Okay, first of all, we do want to understand that this is not just about AI or tech or stock. It’s all the markets, as we know them, I’m talking about the S&P 500, specifically, I’m talking about the NASDAQ.

Alright, so right now, a lot of people with your 401k or mutual funds or financial advisors, maybe you’re just like every two weeks investing, and you’re allocated to the NASDAQ, you’re passively investing, that’s going to be super dangerous. I’ll show you why. So the market is highly concentrated. As a matter of fact, concentration in the market is at an all time high. If to sort of take a look at this, looking at the NASDAQ, again, the NASDAQ 100 here is this skin represents the tech stocks, which is where all the growth is, you’ve heard me talk about the investing in black hole, and how basically only Bitcoin and the NASDAQ have been keeping up with the real rate of inflation of debasement.

And so we can see the NASDAQ right here. This goes back, this is the 2000.com boom and bust right here. And of course, here we are today. Now, this looks pretty good. If you would have just bought here and held till here, you did pretty good. Of course, in the dotcom boom, we had an 81% drawdown pretty massive 81. Now, the one thing to keep in mind about that 81% drawdown is it took a decade or more just to get back to even in the year 2008, the great financial crash, we had a 50% drawdown in the NASDAQ in 2020.

During the pandemic, we had a 36% drawdown. Now, one thing you might notice is that these drawdowns are getting less and less from 81 to 50 to 30. You notice that? So this fits into why I continually tell you that what we’re seeing is a crash up, not a crash down, the way that the government has used debt, especially around this period right here, fiscal spending has changed these markets. Anyway, we’re not talking about that in this video, but you can see that the NASDAQ has gone up. But the thing that I want to draw your attention to is the concentration that’s happening in the NASDAQ.

So what this shows is the largest 10% of stocks as a percent of the total value of stocks. And what this shows us is that over the past five and a half decades, there’s only been two previous peaks in market concentration. So we saw that right here in the 70s. We saw it again in the 2000.com boom and bust. And now we see it again here today. Now, I’ve put this red line on there. So again, I like to show you the charts, you can see the direction, the size, the speed of the moves.

And you can see that the concentration keeps getting bigger and bigger and bigger. Now, why is this important? Well, if you’re buying the NASDAQ index or the S&P 500 index, for that matter, you’re buying the S&P 500 because of the mag seven, right? There’s seven stocks that are driving most of that entire index. In the NASDAQ, you’re seeing about the same thing, the concentration of the top 10 is getting bigger. Now, the reason why this is a problem is if you’re passively invested into the index, and one or two of these companies, there’s only seven in the S&P 500 mag seven, if they drop, they bring the entire index down with them.

Super important to understand. Okay, so we can see that concentration is at an all time high. Now, what does that mean? What are the historical parallels to this? Well, we can see that historically speaking, high concentration equals high danger. We can see that historically speaking, whenever we’ve reached these levels of concentration, we’ve seen big crashes happen off the back of that. Now, we also have historical parallels to where those happen, like the dot com boom, for example, was when we had extreme tech optimism. Now I’m optimistic about tech, but we had extreme tech optimism in the 70s.

Same thing that was when the microprocessor came out. You might know from my quantum wave thesis, the last one started in 1971, right at that peak. I’ll show you more in that in a second. We also had a sudden change in the model. I’m going to talk about that in a second. But this is pricing the NASDAQ in gold. This is from my friend Luke Grauman over at FFTT. Check him out. He’s worth a follow. But what we want to do is we want to look at things if they’re expensive or cheap priced in other things, not just us dollars.

Because if we look at us dollars, it’s always manipulated. So here’s the NASDAQ priced in gold. Again, during the dot com boom got really expensive. But we can see that it’s basically been breaking down ever since. And it’s been in this range right here. And so again, if you’re passively invested in index, you need to be wary of that. And especially when there’s sudden changes in the technology, which is what happened in 1970. And in the year 2000. Alright, so what are we talking about? How is AI changing? And what do we need to be aware of? Well, what really happened, I made a video a few weeks ago, I think it was talking about deep seat, deep seek was a new open source LLM, a new AI model that was released from a company in China.

But what happened is when that was released, we saw the entire market plunge in video, everyone’s darling plunge big time, but the entire market plunge. And I made a video, I’ll link to it down below. You should watch that to really understand. But basically, what it did is expose that all our models for evaluating these companies, the growth of these companies, and even the way that money goes into the index of the NASDAQ has completely changed. And so it highlighted that everything that we thought we knew, we don’t know anymore.

Now, one of the things that we saw is that because deep seek was an open source LLM, then what it did is it’s shown a light on all the AI monopolies that we saw again, open AI, Google, those types of companies, cloud, etc. It showed that their pricing is over. How can any of those open AI or Gemini, how could they be charging when we have open source models that are better. And so it changed all that we saw that AI’s paywall is losing pricing power eventually priced out completely. And what that’s showing is that the entire AI stock market needs to be reevaluated.

Now, it’s not just this, there’s all types of now AI gateways, AI agents that are now bridging all the AI LLMs together. So for example, now, for like five bucks a month, I could get access to all of them without having to pay for them individually. So we’re seeing this, but now again, like these open source models are completely changing this. So then the question is, again, is if LLMs are free, where does the value go? Well, good thing I have an answer for you, because history tells us that. And of course, I’ve been investing in technology for decades.

So let me show you what we how we look at this. So open source shift. So it started where I think right where open AI hit the scene, and they raised a ton of money, right? They’re the Wall Street darling, they’re gaining all this momentum. And where I really first started noticing is meta Facebook meta launched lama, which is an open source, LLM, large language model and AI. And when I saw that happen, it made me stop and think why would Facebook who’s changed their name to meta who’s rushing into the space, why would they open up a free open source model? When the apparent model seems to be like open AI and try to raise a bunch of money and be worth a lot of money? Why would Facebook do that? And one of my thoughts was, well, Facebook is worth, I don’t know, 10 times 20 times more than open AI.

Open AI is not really a threat to them today. They’re really small. If Facebook opens up a open source, LLM, they neutralize opening AI. How can open AI be worth any money if now there’s all the free ones that are even better. And so it seemed like it was like maybe Zuckerberg playing 40 chess, when open AI and he’s trying to kind of play the old playbook. That was what I thought at first. But it’s changed a little bit. And I’m going to show you where the real value is accruing. Now we can see there’s other open source models, code gen, which is Salesforce CRM.

So the the giant the CRM space. So we’re seeing like SaaS companies jumping into this space. Goose, which is an open, it’s an open source AI agent project from Jack Dorsey, the founder of Twitter. Now he’s had a block deep seek, of course, since deep seek came out just a few weeks ago, we’ve seen like half a dozen more come out of China, they’re coming out in mass. But really, what we want to do is we want to look back to the calm and even crypto models to really understand how this works.

Where does the value accrue? Now you might have seen me use this chart. If you watch my content, you see me use this chart all the time. And you understand that in these quantum wave cycles, we have about a 50 year cycle and they happen in these four phases. And we need to understand that the way that we invest through each phase changes. So the way that I invested here is going to be different than the way and the companies I invest in here, different here and so forth. Alright, so right now, we are right here starting this second phase.

And so the old way of investing no longer works. So let me let me break it down with some parallels. We think about technology in layers. All right, technology scales and layers is what most people misunderstand. And so they think the internet was too slow can’t scale, let’s go spend a billion dollars in intranets. Bitcoin is too slow can’t scale, let’s go try all these crypto projects, without understanding that technology scales and layers, but also the way value accrues happens in layer. So what do I mean by that? If you think about the internet, we have a base layer of the internet, right? So this would be like TCP, and IP, right? And then we want email.

So then we have like SMTP. And then we want security. So we have like HTTPS, right? You know what those things are. Alright, but no value as accrued at this base layer TCP IP protocol, SMTP, HTTPS protocols, there’s they’re not worth anything. They’re just open source protocols, where all the value has accrued is on higher levels. So on the applications. So for example, you have Google, Google created Chrome. And now you have all these Chrome plugins right here that are worth a lot of money. You can think about this, like with the iPhone, you have the iPhone, which obviously to create a lot of value, but then think about the app store and think about all the apps inside of that.

Alright, so this is where the values accrued, not on the base layer, but on the stack. Alright, we can think about the same thing with Bitcoin. Now, we had Bitcoin, which is a protocol, it’s a protocol that transfers data, right? And obviously value is accruing there, but not so much on the protocol, but the asset Bitcoin, the asset, not the network. Now we have companies that are building layers on top of the Bitcoin stack. And so certainly, the Bitcoin network has accrued value, but then we have even more value being accrued up here.

That’s what my fund invest in. We invest into these. But back to the topic that we’re talking about right now, which is AI, we’re seeing the same thing. So what I would say is these LLMs are like a base layer. So the LLMs are now open source, the deep seek, the llama, all those things. And there’s no value accruing there. They’re all racing down to the bottom, they’re all for free, where the value gets accrued is on higher levels. So it’s on the applications, the narrow specific use cases that are being built on top of the open source model.

And so we can see right now today, the smart money isn’t just betting on AI. That was the old way. That was 2324. Now it’s betting on the right layer of AI, which layer do we want to invest and do the same way my fund invest into Bitcoin, which layer do we want to invest into? Now, I’ll show you that. Don’t worry. Now I am going to break this down in greater detail and show you what different types of projects and companies are being built there. If you want to join me next week, we’re going to go live deep into this.

I got, I don’t know, 30, 40 charts where I’ll break all of this down and then I’ll take questions. So we’ll talk about it. We’ll discuss it, figure out the best way to find these companies, invest into them. I’ll throw you a couple of names that I like. If you want to come join me, it’s all for free. I’ll put a link down there down below. Come hang out. Let’s, let’s have fun talking about this. Let’s discuss it. I’ll, like I said, live Q&A and so much more. Join me for free at the link down below.

Okay. Now what we’re seeing because of this is a massive shift of capital and it’s not just from AI based layer to higher level. Like I said, it’s, it’s an entire index. It’s even an entire continent. So what am I talking about? Well, if China is now pushing these open source models, what we’re seeing is that the U S has sort of been competing more of a scarcity, right? We got to compete. Let’s keep China out of the game, but China is trying to compete. Now it’s not even playing field. This is a whole conversation about tariffs and so forth.

And you have a country that’s subsidizing things and that’s a whole other topic. We can make a video if you want. Drop me a comment down below. But what we’ve seen is that China has been trying to outcompete us. The U S has been trying to protect, but it’s basically forced the shift in the market where now open source projects are now superior to companies that are trying to protect the moat. If you’re trying to protect the moat, you’re just not going to make it. The world is open source. Jack Dorsey tweeted this so much the other day on Twitter saying, or on X, saying that the world is open source and that is the future.

So I talk about decentralization all the time. But the question is, if this is happening, we know that the U S has been the financial hub of the world. We know that the U S stock markets, S and P 500, the NASDAQ are the greatest investment markets in the world. We know all that money’s accruing there. All the businesses are listed there. But if China is outcompeting us, does some of that money start leaving the U S and going to China? Well, I have a chart to answer that question. What we can see right here, uh, as you know, again, if you watch my videos on a regular basis, the reason why, and I hinted to earlier, the reason why we see the stock markets going up so high is because of the amount of money that they continue to print right through the debasement.

And what we can see here is that, so what we have here is on the red line, we have the NASDAQ 100 going up. That’s right here. But what we have on the green line is the U S net investment position. So this is the amount of money that went in, which you can see is higher than the amount of the NASDAQ itself. And what we have in the blue line down here is the foreign direct investment in U S equities, mainly coming from China. So what happens is just like you, a country has surpluses.

So they have trades exports, they have imports, they have surpluses, they have savings. What do they do with that? Well, they put it somewhere. And in this case, a lot of that has been being recycled, used to be recycled into U S treasuries still is, um, a lot of it is being, has been recycled into the NASDAQ. And that’s exactly what we’ve seen. So China has been recycling a substantial portion of its surpluses into these U S equities, which has pushed the entire index up. But back to the competing angle now, if China now is moving ahead in tech, which, you know, they’ve already sort of outpaced the U S with EVs and batteries and lots of things like that.

Will a lot of that Chinese money instead of going to the NASDAQ start going to their own indexes. So we’re seeing a massive disruption here all over the place. So the question or the thing we need to ponder is not only is AI itself changing, but the global flow of capital is shifting as well. So you have to understand these things if you want to have success with your portfolio, because the world is changing rapidly. It’s always technology that changes the world. And then these quantum wave cycles, like we’re in right now, it’s where all the change happens.

Okay. So what is this next phase for AI? Well, the losers, the ones that are getting left behind are the AI monopolies, the open AIs, the Googles, right? Those are the ones that are trying to kind of hold their LLM behind a paywall. They’re going to be the losers, chip stocks, Nvidia, AMD, why? Because they were pricing in unlimited demand. But what deep sea showed us is that they’re able to train these AI models for way cheaper with way less GPUs than we thought. So instead of the demand for chips being like this, we find out it’s probably more like this.

And as technology continues to accelerate, it might even be more like this. So those are ones we want to watch out for. We also want to watch out for all the hype driven narratives, right? So all these companies that are trying to ride this hype train, we’re talking about like AI SAS companies, think about Salesforce launching their open AI model or their LLM model. So hype driven AI SAS companies with no moat. Again, right? There is no moat. This is all going down. It’s going to be a base layer and they’re all going to be basically competing as commodities.

So who will the winners be? Where will the real money go? Where will the real money be made? Well, AI high value applications, narrow niche use cases, high value applications on top of the open source LLMs. Let me give you an example. In 2022, when open AI released, you had all the open AI APIs you could use. You can do anything. You can create images, you could create text, write code, whatever. Well, when people are faced with I could do anything they don’t know what to do. So there was an app you might remember created called lens AI.

And all it did was just use the APIs that open AI had produced. But with lens AI, I could take a picture of myself and it would give me back 10 avatars, a very narrow use case of what the whole thing could do. But it got so popular, so fast, I believe in like 90 days, it was worth like a billion dollars, because it was a very narrow use case. And that’s what we’re talking about. High value applications on top of the base layer, the open source LLMs. Specifically, I’m looking for where Bitcoin, AI, and open source decentralization, where all those things converge.

So we have a new set of building blocks. What happens when we use these three together where they converge and build things that we can’t even imagine today. And AI infrastructure provides that it doesn’t rely on closed sourced models. Again, it’s all moving to open source. That’s the big theme. Hopefully, you’re catching on to that. I’ve been talking about what I call the decentralized revolution for about five years now. Okay, now how do we play this? What does this mean to us? Well, one, we have to understand the game is changing, right? And we understand through historical parallels exactly how that changes.

Number two, we have to understand that passive investing is super dangerous right now. Because as I said, if we have this over concentration, if one or two of these companies that are at risk right now, if they drop the entire index can drop. On top of that, we realized that maybe China could steal some of that capital take their capital back even to their own markets. We also know that most likely there’s this next four or five year cycle, we’re going to see a massive amount of monetary debasement. And so that also manipulates what we see in the NASDAQ or the indexes.

So I think in order to survive, we need to be much more selective in the companies, specifically looking for the ones that are in that convergence, right? In those three, those are the ones that’s going to be where the biggest gains and they’re going to come again from the convergence of Bitcoin, AI and open source where those three things work together, individually, yes, sure, great. But together is where the magic made where that convergence is. Now, if you want to know more about these cycles, and these three things converging again, come hang out with me next week.

It’s all live. It’s all free. There’s a link down below. I’ll break out. Like I said, 3040 charts will dig through this in great detail, tell you where I’m focusing, where my funds focusing, and then we’ll discuss it. It’s all open live Q&A so much. Come hang out with me, but that’s what I got. Let me know what you think about this. Hopefully, you’re shifting your portfolio. And of course, that’s always give me a thumbs up if you like it. If you don’t, you give me a thumbs down. That’s okay. At least tell me why.

And that’s what I got. Alright, to your success. I’m out. [tr:trw].

See more of Mark Moss on their Public Channel and the MPN Mark Moss channel.