Equities webinar with Peter Garnry

Beyond DeepSeek: AI Is Still an Investment Theme of the Future

Key points:

  • AI remains a solid long-term investment theme, despite the recent market turmoil caused by disruptions like DeepSeek.
  • Diversification is crucial to managing risks in the fast-changing AI landscape. Consider exposure across infrastructure, applications, and platforms.
  • ETFs are an excellent way to invest in AI, offering broad diversification, cost efficiency, and reduced dependency on single stocks.

AI has been the darling of tech investors for years, powering portfolios and headlines alike. But what happens when a disruptive player like DeepSeek enters the scene, creating chaos among industry giants? Should you panic—or pounce?

Despite the recent turmoil and uncertainty, it’s important to remember that AI remains a solid long-term investment theme. Yes, there’s short-term volatility, but the transformative potential of AI to reshape industries and drive innovation is unchanged. For investors who stay calm and focused, these turbulent times could even present opportunities.

What’s Happening with AI Investments?

DeepSeek’s rise has sent shockwaves through the AI investment landscape. Their latest large language model (LLM) matches the performance of U.S. leaders like OpenAI—at just 5–10% of the cost. Developed for around USD 6 million, compared to the hundreds of millions others spend, DeepSeek’s efficiency has rattled the market. Major players like Nvidia, Microsoft, and Meta have seen significant selloffs.

Investors are worried about AI infrastructure spending and price wars. But while the short-term market reaction seems concerning, the long-term outlook for AI remains robust. Cheaper models like DeepSeek’s could democratize AI, opening doors for smaller players to innovate. In short, the AI story isn’t over—it’s just evolving.

Jevons’ Paradox: A Key Concept in the AI Revolution

To understand the implications of DeepSeek’s disruption, let’s explore Jevons’ Paradox. This concept, named after economist William Jevons, shows that technological improvements in efficiency often lead to increased overall usage rather than reduced consumption.

Historically, when steam engines became more efficient, coal consumption didn’t decrease—it surged because steam power became cheaper and more accessible. Similarly, in AI, cheaper models like DeepSeek’s could spark widespread adoption. As the cost of AI tools drops, more companies and industries will likely integrate AI into their operations, driving demand for AI infrastructure and applications.

Why AI Is Still a Long-Term Winner

AI isn’t just a passing trend—it’s a transformative force reshaping industries. DeepSeek’s innovations may lower barriers to entry, accelerating adoption and creating new opportunities.

Here’s why AI remains a compelling investment theme:

  • Democratization of AI: Lower costs enable smaller companies and industries to embrace AI, driving broader innovation.
  • Jevons’ Paradox in Action: Cheaper and more efficient AI tools could create an explosion in demand, just as efficiency has fuelled growth in other technologies.
  • Shift to Applications: While infrastructure providers like Nvidia may face margin pressure, companies using AI to solve real-world problems—like healthcare diagnostics or logistics—stand to benefit most.

How to Respond as Investor?

In times of market turbulence, the key is to take a strategic, long-term approach rather than reacting emotionally. Here’s how:

1. Don’t Panic—Stay Invested
Market corrections are part of investing. Selling during a dip locks in losses and prevents you from benefiting when markets recover. Long-term investors who hold their positions are typically better positioned to capture future growth.

2. Diversify Your Portfolio
Diversification is critical when investing in fast-changing sectors like AI. By spreading your investments across different companies, industries, and regions, you reduce the risk of being overly reliant on a single stock or trend. Remember diversification not just within AI (e.g., infrastructure, applications, and platforms) but also across unrelated sectors to balance risk.

3. Use ETFs for Broader Exposure
ETFs are a great way to gain exposure to the entire AI ecosystem. They provide:

  • Broad Diversification: By pooling investments across multiple companies, ETFs reduce single-stock risk and capture opportunities across the AI value chain, including infrastructure, software, and applications.
  • Cost Efficiency: ETFs typically have lower fees than actively managed funds, making them accessible for investors.
  • Automatic Adjustments: As the AI industry evolves, ETFs rebalance their holdings to reflect the most relevant players, simplifying portfolio management.

ETFs offer investors a low-maintenance way to participate in AI’s long-term growth while minimizing risks tied to individual stocks.

4. Take Advantage of Market Dips
If you’ve been waiting for a chance to invest in AI, now might be the time. Use dollar-cost averaging to build your position gradually, reducing the impact of market fluctuations while potentially benefiting from discounted valuations.

5. Focus on the Big Picture
The AI investment story isn’t just about chips or flashy announcements. Look for companies using AI to solve real-world problems, such as improving healthcare, automating logistics, or enhancing sustainability. These firms are likely to thrive as AI adoption continues to grow.

A New Chapter for AI Investing

DeepSeek’s rise may have disrupted the market, but it doesn’t derail AI’s long-term potential. In fact, innovations that lower costs and broaden accessibility could spark the next wave of growth.

For investors, the key is to stay calm, diversify, and focus on the bigger picture. ETFs provide an easy and efficient way to participate in AI’s growth without the risks of single-stock dependency. AI isn’t just here to stay—it’s evolving into something even bigger. By staying disciplined and strategic, you can position yourself to benefit from this exciting investment theme.

 





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