📈 DeepSeek Wreaks Havoc

Is this the Nvidia killer?

DeepSeek Sinks the Market

Yesterday we saw the S&P 500 drop by 1.41% and the NASDAQ drop 2.91% after news came out over the weekend that China developed an AI LLM called “DeepSeek” that is just about as effective as OpenAI’s ChatGPT o1 at 1/27th of the cost.

This was something that was previously not thought to be possible, and frankly it makes Microsoft’s investment into OpenAI look foolish based on the cost to create DeepSeek vs. ChatGPT.

With this breakthrough in efficiency, it is reasonable to assume that demand for AI chips, the amount of energy needed to power AI, and the amount of land needed to build data centers to support AI is being vastly overestimated.

This is why we saw major sell-offs in names semiconductor names like NVDA and TSM, AI power names like CEG and VST, and data center land names like TPL and LB.

NVDA tested (and cracked) its 200 SMA for the first time since January 2023.

There was real selling behind this move to bring it down that far, and unless there is a new revelation about DeepSeek changing our current understanding of it, it will be difficult to lure investors back into the name in a major way.

Stocks to Watch

When American companies are able to leverage the tactics DeepSeek used to produce AI at a fraction of OpenAI’s cost, CAPEX spend will be significantly lower than previously expected.

Specifically AI cloud names stand to benefit from these increased efficiencies. It is why you saw names like CRWD CRM and SNOW show significant relative strength when compared to semiconductor stocks.

For more on this and how to take advantage of the volatility, watch the video below: