DeepSeek's Disruption and What It Means for Your Investments
Jan 28, 2025
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Stephen Yiu, the lead manager of the Blue Whale Growth Fund, shares his insights on the recent Big Tech selloff and the evolving perspectives on AI investments. He explains why he trimmed stakes in US tech firms, citing concerns over AI costs. The conversation dives into the rise of DeepSeek, a Chinese AI company poised to challenge American tech, and highlights new investment opportunities in sectors like sports gambling. Yiu also reflects on how political shifts influence market strategies while navigating the complexities of AI's transformative effects.
Stephen Yiu discusses the necessity for rigorous evaluation in investing, as evidenced by his fund's cautious reduction in stakes in major US tech firms amidst rising AI costs.
The emergence of DeepSeek represents a significant disruption in the AI landscape, optimizing model training while threatening established US tech giants' market positions.
Yiu highlights the burgeoning US sports gambling market as a promising investment opportunity, poised for significant expansion as legalization efforts progress across more states.
Deep dives
BetterHelp and Accessible Mental Health Services
The episode highlights BetterHelp as a transformative platform for mental health services, offering clients the flexibility to communicate with therapists via video, phone, or text chat. This accessibility aims to reduce barriers to mental health care by allowing individuals to connect easily from their own devices. With an emphasis on convenience, BetterHelp provides a solution that can fittingly serve anyone seeking mental health support when they need it most. Clients receiving therapy through BetterHelp also benefit from promotional discounts, making these services more affordable.
Investment Philosophy of Blue Whale Growth Fund
Stephen Yu, the lead manager of the Blue Whale Growth Fund, describes the fund's strategy as high conviction, targeting a concentrated portfolio of 25 to 35 quality stocks. The focus remains on investing in businesses with strong fundamentals, including sustainable revenue streams and robust balance sheets. Assessing company quality involves evaluating their capacity for market share growth amidst competitive environments, which is essential for outperforming the broader market. This disciplined investment approach aims to achieve significant returns, with the fund's performance exceeding that of its UK peers since its inception.
Cautious Outlook on Leading Tech Stocks
Stephen Yu expresses a cautious perspective on major US tech companies, including Microsoft and Meta, especially in light of an increase in AI-related expenditures. The fund has recently reduced its stakes in these firms due to concerns over inflated capital expenditures not producing proportional returns. This strategic reassessment follows a noticeable decline in their stock valuations and reflects a broader concern regarding profit sustainability in an evolving tech landscape. The conversation suggests the necessity for rigorous evaluation in maintaining investments within the tech sector amidst rising costs and competitive pressures.
The Influence of DeepSeek on AI Development
The episode discusses the emergence of DeepSeek, a Chinese AI platform that poses a competitive threat to established US tech giants by optimizing AI model training using less energy and cost. This breakthrough could democratize AI development by making it accessible to smaller firms that previously lacked the resources, potentially reshaping the industry landscape. Yu notes that this innovation may prompt significant shifts in market dynamics, encouraging enhanced competitiveness among AI developers and possibly leading to increased productivity. He indicates a proactive stance on AI infrastructure, highlighting the enduring relevance of companies like NVIDIA in the evolving tech ecosystem.
Opportunities in the US Sports Gambling Market
Stephen Yu identifies the growing US sports gambling market as a promising investment opportunity, particularly through companies like Flutter and DraftKings that dominate the sector. With only about 50% of states currently offering access to legal sports betting, there is substantial potential for market expansion as more states move toward legalization. Yu emphasizes that this market segment captures consumer spending that may have otherwise gone to traditional entertainment, making it a unique industry trend. The favorable economic conditions and changing public perceptions create an environment ripe for growth in sports gambling.
Founder and Manager of the Blue Whale Growth Fund Stephen Yiu joins this week to discuss the Big Tech selloff, his outlook for AI and where he’s investing now. Yiu, whose investment fund is backed by billionaire Peter Hargreaves, reduced its stakes in major US technology companies on concern over the costs of AI at the end of 2024. What did he see that other investors didn't? And where does he see opportunities now?
Plus, what Stephen is reading now: Lucky Loser: How Donald Trump Squandered His Father's Fortune and Created the Illusion of Success
