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 deep Seek released an open source AI model that's 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 light deep Seek is forcing a total rethink of AI stocks and just stocks overall on 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 bus 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 or 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 in gloom video. AI is massively transformative. It is going to create massive efficiencies, and it is changing the world. I use it every day. I'm making money invest 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 living under rock that AI has completely skyrocketed really from about
twenty twenty two to twenty twenty three. It's not that old, right open AI storm. The scene was that November of twenty twenty two, So all twenty twenty three and twenty twenty four, it has been blowing up. It's the darling. Wall Street loves that. Every investment newsletter's 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 models shifting. So if you're still investing like you were in twenty two, twenty three, and twenty four, you're gonna be losing money. And now that we'd 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 highlighting is that valuation is only a concern when the underl buying fundamentals change, and that's the problem. Those fundamentals are changing. Okay, so 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 and P five hundred specifically,
I'm talking about the NASDAC. All right, So, right now, a lot of people are with your four oh and k, your mutual funds or financial advisors. Maybe you're just like every two weeks investing and you're allocating 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 one hundred here is this again represents the tech stocks, which is where all the growth is. You've heard me talk about the investing 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 NASDAC right here. This goes back. This is the two thousand dot 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 tell here he did pretty good. Of course, in the dot com boom, we had an eighty one percent draw down, pretty massive eighty one. Now, the one thing to keep in mind about that eighty one percent draw down is it took a decade or more just to get back to even In the year two thousand and eight, the Great Financial Crash, we had a fifty percent draw
down in the Nasdaq. In twenty twenty, during the pandemic, we had a thirty six percent draw down. Now, one thing you might notice is that these draw downs are getting less and less, from eighty one to fifty to thirty. You notice that. So this fits into why I continually tell you that what we're seeing as 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 ten percent 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 seventies, we saw it again in the two thousand dot 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 of 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 and P five hundred index for that matter, you're buying the S and P five hundred 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 ten is getting bigger. Now. The reason why this is the problem is if you're passively invested into the index and one or two of these companies, there's only seven,
and they have to be five hundred back 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 happened, 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 seventies. Same thing that was when the microprocessor came out. You might know from my quantum wave thesis the last one started in nineteen seventy one, right at that peak. I'll show you more than that in a second. We also had a sudden change in the models. I'm going to
talk about that in a second. But this is pricing the nasdak in gold. This is from my friend Luke Grammanov 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 and to be wary of that, and especially when they're sudden changes in the technology, which is what happened in nineteen seventy. In the year two thousand, all right, 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 Seat 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 plunged time, but the entire market plunged, 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 exposed 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 NASDAC 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 shone 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 gym and how could they be charging when we have open source models that are better. And so that changed all that we saw that AI's paywall is losing pricing power eventually
be 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 of the aillms 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 lllms 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 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 Darland, They're gaining all this momentum. And where I've really first started
noticing it is Meta. Facebook Meta launched Lama, which is an open source LLM, a large language model an 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, ten times twenty times more than open AI. Open AA is not really a threat to them today, there's really small. If Facebook opens up a open source LLM, they neutralize opening I how can opening I 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 forty 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 this other open source models, code gen, which is Salesforce CRM, so the giant the CRM space. So we're seeing like SaaS companies jumping into the space. Goose which is an open it's an open source AI agent project from Jack Dorsey, the founder of Twitter. Now he's
head a block deep Seek. Of course, since deep Sea came how just a few weeks ago, we've seen like half a dozen more come out of China. They're coming out in mass A small business owner, are you buried in all types of work keeping you from the real thing that makes you money? Well that's where just Works comes in. They're the all in one platform that supports small business growth. You can get all their tools that help with benefits like payroll and HR and compliance with
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and more. Again that's Justworks dot com slash podcasts. But really what we want to do is we want to look back to the dot 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 fifty 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. All right, So right now we are right here starting this second phase, and so the old way of investing no longer works. So 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 accruise happens in layers. 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 all right, but no value as a crude at this base layer TCP, IP protocol, SMTPA, CTPS protocols, 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 you create a lot of value, but then think about the app store and think about all the apps inside of that, all right, So this is where the value is accrued, not on the base layer, but on the stack, all right. We can think about
the same thing with bigcoin. 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 a crude value, but then we have even more value being accrued up peer. That's what my
fund investment 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 lms are like a base layer. So the lms are now open source, the deep seek, the LAMA, 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 twenty three, twenty four. Now it's betting on the right layer of AI. Which layer do we want to invest and do the same way might fund investing in to bitcoin? Which layer do we want to invest into?
Now I'll show you that. Don't worry. Now, I am gonna 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 gonna go live deep into this. I got I don't know, thirty forty charts or 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 have fun talking about this. Let's discuss it all. Like I said, live, Q and A and so much more. Join me for free and 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 a higher level. Like I said, it's an entire index. It's
even an entire continent. So what I'm talking about, Well, if China is now pushing these open source models, what we're seeing is that the US 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 an even playing field. This is the 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 US 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 mote. If you're trying to protect the mote, you're just not going to make it the world is open source. Jack Dorsy 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. It's why I talk about decentralization all the time. But the question is if this is happening. We know that the US has been the financial hub of the world. We know that the US stock markets S and P five hundred and the Nasdaq are the great investment markets in the world. We know all that money is accrueing there, all the businesses are listed there. But if China is out competing US, does some of that money start leaving
the US and going to China. Well, I have a chart to answer that question. What we can see right here, as you know again if you watch my videos on a regular basis the reason why, and I hinted too earlier, the reason why we see the stock markets going up so high is because 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 one
hundred going up, that's right here. But what we have on the green line is the US 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 US 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 US treasuries, still is a lot of it is has been recycled into the NASDAK and that's exactly what we've seen. So China has been recycling a substantial portion of its surpluses into these US equities, which is pushed the entire index up. But back to
the competing angle. Now, if China now is moving ahead in tech, which they've already sort of outpaced the US 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. If 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 in 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 Deepseak showed us is that they're able to train these AIM 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 SaaS companies think about Salesforce launching their open AM model or their LM model. So hype driven AI SaaS companies with no moat again, right, there is no mot 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 twenty twenty two, when open ai released, you had all the open APIs you could use. You could do anything. You can create images, you could to create text, right, 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 lensa AI and all it did was just use the APIs that open i had produced. But with LENDSAI, I could take a picture of myself and it would give me back ten avatars. A very narrow use case of what the whole thing could do. But it got so popular so fast. I believe in like ninety 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 lms. 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 really
high on close sourced models. Again, it's all moving to open source. That's the big theme. Hopefully you're catching onto 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 realize 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, yeah 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, thirty forty charts. We'll dig through this in great detail. Tell you where I'm focusing where my fund's focusing, and then we'll discuss it. It's all open life, Juneing 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 thumbs up if you like it. If you don't give me the was down that it's okay. At least tell
me why. And that's what I got. All right, to your success, I'm out,