Alternative Investing Report - January 29, 2025

*as of 1/28; Sources: S&P, BTC, FTSE, DJRE, CL50

Chinese AI startup DeepSeek has disrupted both the AI world and the broader financial market with its open-source model that was supposedly built for just $6 million, compared to the billions spent by competitors. While the public markets including with Nvidia - which posted the largest single-day market cap loss in history - rebounded slightly on Tuesday, concerns remain. These are prominent especially in Venture Capital, which poured more than $100 billion into AI companies in 2024. Major firms like a16z ($7.1 billion) and Sequoia ($6.4 billion) have significant amounts of their AUM tied up in AI, and a broader crash could be catastrophic.

➨ TAKEAWAY: DeepSeek’s emergence could mark a pivotal point for the AI industry, putting pressure on the likes of OpenAI and Anthropic to develop more advanced models to justify their capital outlays. The lean upstart also calls into question the future of the Stargate Project, an announced $500 billion AI infrastructure agreement between Oracle, OpenAI and Softbank. On one hand, the geopolitical concerns of a Chinese AI startup disrupting the market could spur more spending in the U.S., but on the other, it could show that this level of capital expenditure is unnecessary to keep the tech moving forward. Investors need to consider whether this is the beginning of a market correction for AI, or merely a bump in the road.

In this episode of Smart Humans, Slava Rubin talks with Sacra’s Marcelo Ballvé about Stripe, the global payments platform last valued at $95 billion. They dive into the company’s growth, outlook, competitors, IPO prospects, and answer investor questions.

U.S. home prices rose by 0.3% in November and 4.2% year-over-year according to the just-released FHFA House Price Index. However, the year-over-year gain is 2.7 percentage points lower than a year ago and has now declined in four straight months, and all nine Census regions are showing a slower rate of growth. Meanwhile, the S&P CoreLogic Case-Shiller Index showed a 0.1% decline in prices in November, with a 3.8% year-over-year gain, a slight improvement over October’s 3.6% number.

➨ TAKEAWAY: The slowdown in housing price growth continued throughout 2024 and is likely to continue into 2025 as mortgage rates continue to hold down buying demand and limit purchasing power. For buyers and investors, this reality could lead to potential opportunities, with the average new construction home dropping in price by 0.7% year-over-year, and prices in the South and West declining even further.

📈 Millennial wealth rising quickly: The total net worth of Millennials hit $15.95 trillion in 2024, nearly quadruple where it was in 2019, largely driven by real estate and retirement account gains. While much of it is illiquid for now, these gains will eventually translate into more investor dollars coming into the market in the long-term.

🚘 Most expensive F1 car ever: A 1955 Mercedes “Streamliner” that was used in F1 races is set be auctioned on Saturday with an estimated value of $52 million, which would be a record for a grand prix car and the 2nd most expensive car ever auctioned.

🏢 CRE loan modifications spike: There were a record $19 billion of commercial real estate loan modifications in 2024, as high interest rates and declining property values have caused banks to choose to renegotiate and extend loans rather than foreclose.

🪙 KuCoin pays $300 million fine: The crypto exchange settled with the U.S. DOJ over allegations of running an unlicensed exchange, agreeing to pay a $300 million fine and exit the U.S. market for at least two years.

🥃 American single malt whiskey fund: ASM Capital Group announced a new investment fund focused on barrels of American Malt Whiskeys, with $10 million in initial funding and a target of $250 million by 2026.

🏡 Home insurance costs by region: Home insurance premiums have increased on average more than 33% since 2020, as extreme weather events such as wildfires and hurricanes become more common, but those increases are not spread evenly throughout the country. These maps show which regions (Florida, in particular) have seen the highest and lowest percentage rate hikes since 2020.

Yes, there is a memecoin called “Fartcoin,” and even after losing 50% of its value, it still maintains a market cap of more than $825 million. Created last October, it rose from fractions of a cent all the way to $2.50 before falling significantly in the past ten days. The fact that it rose in value based on nothing but sheer speculation can be seen as an indictment of memecoins and the crypto market in general, particularly its casino-like qualities. Memecoins have taken a hit since the debut of Trumpcoin - itself down 33% over the past week - shifted a lot of speculative money its way. Then again, it stands to reason that anyone putting money into something called Fartcoin has to know that they risk losing it all.