China’s answer – DeepSeek – to the artificial intelligence (AI) tools and models such as Chat GPT triggered a sell-off across global stocks on Monday.
According to reports, (free) downloads of DeepSeek have already overtaken American rivals in Apple’s US app store.
The emergence of an almost-as-good AI utility created at much lower cost that also uses much less energy has set the proverbial cat amongst the pigeons.
Stock of chipmaker NVidia was among the top losers in trade on Monday in the US, with the counter plunging nearly 17 per cent, wiping off $600 billion in its market capitalisation (market-cap).
Tech-heavy NASDAQ slipped 3.1 per cent to 19,342 levels on Monday with NVidia being the top loser.
Besides tech stocks, the DeepSeek innovation, analysts said, has also triggered fears that demand for energy-intensive AI infrastructure could falter, sending ripples through the markets.
Here’s how leading brokerages and experts have interpreted the development.
UBS
While DeepSeek’s aggressive pricing strategy raises questions on big tech’s high capex intensity, we need to understand that DeepSeek’s models still have many limitations compared to the frontier models from big tech coupled with limited transparency so far on training methodology.
Investors should stay calm and take advantage of extreme volatility through structures and buy the dip in quality stocks. Any undue correction in quality stocks/tech benchmarks barring a major macroeconomic event historically proved to be good buying opportunities.
Jefferies
The DeepSeek development means that investing in AI may be nothing like as expensive as previously thought. This should accelerate the advancement of the technology. But at the same time it also means that chief financial officers will start to ask questions about the enormous amounts being spent on computing power in the AI arms race.
The stock market would at some point this year question all this spending in the continuing absence of clear proof of monetisation. This was, first and foremost, a potential threat to the share prices of the hyperscalers who have been spending the money. But the DeepSeek news will now cause pressure on the AI hardware supply chain on concerns that the likes of Meta will do a U-turn and slash capex spending.
The other issue raised by the DeepSeek news is that, while it is clearer than ever that the age of AI is coming, it is also increasingly equally clear that the long fashionable concepts of “moats”, as applied by fund managers to individual companies in the investment world, looks ever more precarious, if not redundant, in the AI world given the monumental scope for disruption.
Rabobank International
The week ahead is replete with events in the form of central bank announcements (including the Fed and the ECB) or a slew of scheduled earnings releases. The latter include tech heavyweights Apple, Tesla, Microsoft, Meta and ASML.
We wonder whether DeepSeek story sees the market likely to adopt a somewhat asymmetric reaction function when it comes to these releases. This as upbeat reports might be discounted as having preceded concerns over US tech losing its competitive edge while weak results might be seen as indicating the sector was softening even before China’s threat emerged.
deVere Group
DeepSeek’s breakthrough signals a shift toward efficiency in AI, which will redefine both energy and AI markets. The opportunities for investors willing to act now are enormous. DeepSeek’s model combines cutting-edge algorithms to slash the energy demands of AI training and deployment. This challenges the assumption that AI’s growth is tied to ever-increasing energy consumption.
While the market is reacting to short-term uncertainty, efficiency-driven AI models will expand adoption into new markets and industries. This means more widespread use, deeper integration, and ultimately, sustained demand for energy solutions.
Renewable energy providers, in particular, are poised to gain as AI infrastructure evolves to prioritise sustainability and return on investment (ROI). While the immediate reaction in energy stocks reflects uncertainty, the long-term outlook remains robust. Companies driving innovation at the intersection of AI and clean energy will emerge as the leaders of this new era. for energy-intensive AI infrastructure could falter in the months ahead.
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