5 Stocks Surging on DeepSeek's Shocking Week Euphoria in Silicon Valley turned to panic this week after a Chinese-based startup called DeepSeek released a new large language model (LLM). It’s very good. And it’s very cheap. Not only did DeepSeek’s “R1” model beat all but the top models from OpenAI and Google in quality rankings. But it did so by spending just $6 million in model training – an amount that Andrej Karpathy, the former head of AI at Tesla Inc. (TSLA), called “a joke of a budget.” Cost savings extend to its day-to-day use as well. Initial third-party tests suggest R1 costs a tenth of what it costs OpenAI to run its “o1” model. That triggered a massive rout on Wall Street. Companies from AI chipmaker Nvidia Corp. (NVDA) to AI data center power producer Constellation Energy Corp. (CEG) saw their share prices tumble 20% or more, wiping out more than a trillion dollars in market capitalization. Because if DeepSeek’s claims hold true, AI might not require as much power – and perhaps not as many cutting-edge GPUs from Nvidia – to train and run. For retail investors, these headlines might feel like whiplash. One moment, we’re being told we need massive “hyperscaler” data centers and high-end chips to power next-generation AI. The next, a barely known startup rattles the very foundation of the 2024 bull market. Still, there’s more to this story. Since the release of R1, our team has examined how the system gets such fantastic results. We wanted to find out what makes this system so special... and if that look under the hood fundamentally changes our outlook. Our conclusion is straightforward. As senior analysts Louis Navellier, Eric Fry, and Luke Lango outlined in a video conversation on Thursday, we believe R1 is a real breakthrough that confirms our predictions. To us, DeepSeek is further proof that superintelligent AI is on the way. That leaves us precious little time to prepare. Because once AI becomes smarter than the average person, there’s no turning back. A superintelligent AI will produce even better versions of itself, which would then make even better versions, and so on. Millions of jobs could get lost to AI in the blink of an eye. In fact, the release of R1 only makes us more confident this will all happen in the next 1,000 days. And it’s something Eric details in his latest presentation. So, this week, let’s explore five competitor-proof companies to invest in to get financially ahead before the storm. From Mafiaboy to AI: A New Age of Cybersecurity In February 2000, a hacker known as “Mafiaboy” took down several major websites, including CNN, eBay, and Yahoo. Mafiaboy, who was later identified as a 15-year-old high school student, did so by using several compromised university servers to overload websites with junk requests. Since then, these “distributed denial-of-service” (DDoS) attacks have become more sophisticated. In 2016, sites from Netflix to Amazon went down after malware named Mirai hijacked Internet of Things (IoT) devices like cameras, smart TVs, and baby monitors to create a massive “botnet” to attack its targets. Today, AI is routinely used to coordinate attacks. And that’s where Cloudflare Inc. (NET) comes in. Cloudflare is the world’s largest DDoS prevention company, with an 82% market share. We previously recommended the stock in June 2023 (it’s risen +115% since then), and again earlier this month (+23% since). The rise of ultracheap AI suggests even more demand to come. Cloudflare is an expert on bot attacks, which include credential stuffing, inventory hoarding, as well as the traditional DDoS variety of mischief – all which will increase with cheaper AI. In fact, the average analyst revision has already increased NET’s earnings per share forecasts by 5.4% over the past 30 days. Cloudflare also continues to score a “B” on Louis Navellier’s Stock Grader system (subscription required), suggesting greater gains to come from a quantitative perspective. That said, investors may need to be patient for Cloudflare’s story to play out. The stock has risen sharply since I originally recommended it in 2023, and earnings must grow for the firm to fill in its premium valuations. Two AI Appliers At InvestorPlace, we’ve been distinguishing between “AI builders” and “AI appliers” for a while now: - AI Builders. These firms create the physical chips, data centers, and other infrastructure needed for AI to run. These are much like the telecom companies of the dot-com boom.
- AI Appliers. These companies use this infrastructure to provide softwareservices on top. This would be much like Netflix Inc. (NFLX), which relied on fast internet connections to provide streaming services.
In a tech or industrial revolution, “builders” are generally the first firms to succeed. A new technology like the internet (or AI) must have data centers, broadband networks, switches, and so on. We’re now seeing the initial signs of moving onto the “Appliers” stage. Last week, several of Louis’s A- and B-rated software stocks began rising even as chipmakers and power producers plummeted. Among these winners, two appliers with wide moats stand out. - HubSpot Inc. (HUBS). This Boston-based software firm specializes in helping small and medium-sized businesses with inbound marketing and customer management. Its AI tools generate leads, automate marketing, manage customer service, and more. That makes the rise of better, cheaper AI (like DeepSeek) a net positive, because it will lower costs and increase the number of potential software products. Analysts also expect HubSpot’s reported earnings per share to flip from negative to positive this year, which is a typical signal of large gains ahead as loss-averse investors begin to buy shares.
- Shopify Inc. (SHOP). The e-commerce website builder has similarly embraced AI in its “Shopify Magic” product. Small businesses can use the system to write product descriptions… generate customer emails… even answer customer chats. The Canadian company has also incorporated other AI bots to help with dynamic pricing, logistics, and more.
Both HubSpot and Shopify have risen 9% since DeepSeek’s launch and score Bs in Stock Grader. The Chinese Dark Horse Earlier on, I noted how Google took just three months to add OpenAI’s o1 “thinking” model into its Gemini product. Alibaba Group Holding Ltd. (BABA) did it in two. In fairness, the Chinese tech giant has long been a tough stock to stomach. Though it controls 42% of the Chinese e-commerce market, Alibaba has also been subject to intense government scrutiny. In 2020, Jack Ma, the founder and CEO of the firm, “disappeared” after criticizing the Chinese government. A planned IPO of its subsidiary, Ant Group, was shelved soon after. By mid-2024, Time magazine warned that “big tech may never recover in China,” citing a sweeping regulatory crackdown on Chinese tech giants. While BABA shares remain 66% below their pre-crackdown peaks, that could quickly change with the success of DeepSeek. On the technical front, Alibaba’s flagship LLM model, called Qwen, looks much like DeepSeek R1. It uses an MoE architecture, and has surpassed many of its Western counterparts in both quality and cost efficiency. The resounding success of DeepSeek’s version suggests Alibaba is even closer to catching up than previously thought. Then there’s the potential for deregulation. In 2017, the Chinese government vowed to become the world leader in AI by 2030 and poured enormous sums of money into government-sanctioned projects. DeepSeek succeeded without government help, sending a strong signal that tech companies often do best when left to their own devices. I don’t expect the Chinese government to let Alibaba suddenly run wild. But even a little less scrutiny would be an incredible boon to B-rated Alibaba, which currently trade at a rock-bottom 11X forward earnings. The Healthcare Pick Finally, drug development firms will benefit from DeepSeek’s innovation. The biopharmaceutical industry currently spends almost $2 billion to bring a new drug to market. Better AI will decimate this figure by helping drug companies discover better therapies, predicting side effects, and allowing researchers to virtually test drug candidates before human trials begin. One of the biggest winners will be Moderna Inc. (MRNA), one of my nine top picks for 2025. The company is a lead developer of “cancer vaccines,” and improved AI will allow its products to be tailored to individuals at a lower cost. I That makes Moderna even better exposed to the upsides of superintelligent AI. Its mRNA-4157 cancer vaccine has been in development since at least 2022 and could be approved for use as early as this year. Bespoke versions of the therapy are likely next. Though Moderna scores a D in Stock Grader, this figure is understated because of the biotech’s start-up nature (negative profits) and significant off-balance-sheet assets (intellectual property). If its AI-powered cancer drugs are a success, shares could rise as much as 10-fold over the next several years. | Recommended Link | | | | On March 18th, an event is taking place that could completely shock the market. Stocks could go ballistic… Businesses could get blindsided… The gold market could get rocked… And one man, millionaire trader Jeff Clark is pounding the table on one single stock before this event. Because this one single stock has shown his readers gains of 85% in 14 days, 120% in under 3 months, and even 222% in just 8 days. While the past is no sure indicator for the future… Those gains could pale in comparison to what’s coming. Click here now to see what’s going on. |  | | The AI Revolution Is Here… and AGI Is Coming DeepSeek’s emergence should remind investors of one crucial truth in tech: Disruption is inevitable. There will always be a new technology, startup, or approach that flips the conventional wisdom on its head. Former giants from Kodak to AOL are toppled as newer rivals rush in. And this time around, change is happening faster than ever. Many companies will fail in the AI Revolution. And millions of workers will suddenly find themselves replaced by AI that never needs to sleep or eat. Fortunately, there’s still time to get ahead. In his most recent presentation, InvestorPlace senior analyst Eric Fry talks about his 1,000-day countdown to AGI. The launch of DeepSeek signals that AGI remains on track to reach Eric’s 1,000-day target. Here’s why this is so important… By now, you’ve heard us warn that AI is coming for people’s careers. Accounting, legal research, medicine, even high-powered decision-makers near the C-suite could eventually be outsourced to superintelligent AIs. In the workplace, AGI is like the equivalent of having a human you could hire, or compete against, as a coworker. Once AI hits this tipping point, there’s no reason a model couldn’t develop even better versions of itself to replace humans in almost any role. That’s going to be disruptive, to say the least. Many experts initially thought we had time to prepare. DeepSeek changes that. Investors only have a tiny window to prepare during this “pre-AGI” moment before it’s too late. Luckily, Eric has identified several companies that are strategically positioned to capitalize on AGI’s imminent arrival, and he wants to share them with you. You can learn more about these companies in his free 1,000 Days to AGI special broadcast. Click here to access the special presentation. Until next week, Tom Yeung
Markets Analyst, InvestorPlace | 
