DeepSeek is wreaking havoc on the tech space on Monday morning. The Daily Breakdown digs into Nvidia, the Nasdaq, and more.
Monday’s TLDR
- Nvidia leads tech selloff
- DeepSeek sinks AI stocks
- This week is PACKED with events
Tech wreck
Mondays are normally quiet, particularly near all-time highs. We don’t usually wake up to see Nvidia down 10%, the SPY ETF down over 2% and the QQQ ETF down almost 4%.
Well, welcome to today.
Last week we talked about the markets sending a “pause signal.” While that may have been true, nobody could have predicted this kind of morning. Tech stocks and AI names are getting crushed amid worries about DeepSeek, a Chinese AI lab that builds open-source large language models (LLMs). For reference, ChatGPT is an LLM.
The possibilities with AI are limitless, but the problem is, they are expensive and power-hungry applications that require a lot of GPUs and energy. DeepSeek reportedly took a different (and clever) engineering route, laying out a product that is supposedly almost as good as something like ChatGPT, but at a fraction of the cost.
Given the huge demand for Nvidia’s GPUs — and the lofty margins the company generates — investors can see why this could be a threat. They can also see why cash-rich companies laying out tens of billions of dollars for AI are under pressure this morning, too.
If tech firms need far less GPUs, that’s an obvious problem for Nvidia. On the flip side, if more companies can afford to build AI applications — i.e. no longer just mega-cap tech — then that could actually increase demand for Nvidia’s products.
Right now though, that’s not the takeaway. Sometimes, Wall Street is known for “sell first, ask questions later.”
Be careful with overreacting this morning. Emotions are going to be high and volatility is going to jump. The AI space can and will continue to evolve. At times, like today, the changes will come swiftly. Make decisions that fit with your goals and plans, reassess if you need to, and remember: Panicking rarely makes for a good investment decision.
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Weekly Outlook
Today, investors will try to make sense of this morning’s selloff and see if we can get some sort of bounce after an unexpectedly large decline to start things off. Companies like SoFi and AT&T reported earnings this morning as well.
Tomorrow, companies like Royal Caribbean, Starbucks, Boeing, and General Motors will report earnings.
Buckle up, because Wednesday is when things really pick up. That’s as Tesla, Meta, and Microsoft report earnings, but it’s also when the Fed makes its interest rate decision and chair Powell speaks at 2:30 p.m. ET. Expectations are for rates to remain unchanged.
On Thursday, the US GDP report will be released at 8:30 a.m. ET (and the EU GDP report will be released at 5 a.m. ET). On the earnings front, companies like Apple, Intel, Visa, and UPS will report.
On Friday, the PCE report will be released at 8:30 a.m. ET. Remember, this is the Fed’s preferred inflation gauge. On the earnings front, energy giants Exxon Mobil and Chevron will report earnings.
Remember, you can always access (and bookmark) eToro’s earnings page.
What Wall Street is watching
SOFI – SoFi reported earnings on a tough day and the stock is reacting in kind, down over 10% in pre-market trading. While the companies beat on earnings and revenue expectations, guidance is being viewed as underwhelming. But keep in mind, before today’s fall, shares were up roughly 200% from the August low.
BTC – While Bitcoin may not be directly affected by the AI news, it’s wavering on the day as risk-on assets take a hit. It was down over 4% at one point, but has since bounced back and continues to hold the key $100,000 level. Check out the charts now.
Disclaimer:
Please note that due to market volatility, some of the prices may have already been reached and scenarios played out.