How DeepSeek has exposed the short lifespan of monopolies
What are the best businesses? The answer to that question is “monopolies” and investors need to ask whether the current crop of artificial intelligence (AI)-driven large language models (LLM’s) and the suppliers of their chips, storage and energy need have the monopoly characteristics they assumed.
This week the broader opportunity of AI for sharemarket investors was questioned after the dramatic arrival of the China-based DeepSeek AI service, which sparked a mini sell-off on all stocks linked with the AI boom.
In the absence of effective regulation, monopolists can raise prices, and maintain elevated profit margins and returns on equity over long periods.
This article was first published in The Australian on 31 January 2024.
