DeepSeek AI causing tech sell-off on fears of competition, but market reaction may be exaggerated

From NASDAQ: 2025-01-28 08:00:00

Chinese AI startup DeepSeek caused a tech sell-off on Monday, sparking fears of a cheaper, open-source large language model that could challenge U.S. dominance. The Nasdaq—100-based tech-heavy ETF QQQ lost 2.9%, with NVIDIA plunging 16.9%, wiping out $589 billion in market value.

The market turmoil impacted key chipmakers like Broadcom, Lam Research, KLA, Marvell, and tech giants Microsoft and Alphabet. SPDR S&P 500 ETF Trust declined 1.4%, while SPDR Dow Jones Industrial Average ETF Trust added 0.7%. Investors are closely monitoring guidance from big tech companies amid concerns about DeepSeek’s disruptive potential.

Wall Street reacts to AI infrastructure concerns as DeepSeek’s AI assistant raises questions about the necessity of massive investments in cutting-edge AI accelerators, particularly from NVIDIA. Analysts believe market reaction may be exaggerated, with potential for innovations like DeepSeek’s model to drive further growth in AI infrastructure.

DeepSeek’s rise poses a growing challenge for U.S. policy as it highlights limitations of trade restrictions and raises concerns about the effectiveness of current policies in U.S.-China tech competition. The breakthroughs from DeepSeek suggest China could bypass hardware constraints, impacting broader implications for tech competition.

Investors may find buying opportunities in semiconductor or chip ETFs as fears about DeepSeek potentially being overblown create dips in the market. Semiconductor ETFs like VanEck Semiconductor ETF, iShares Semiconductor ETF, and SPDR S&P Semiconductor ETF, as well as tech ETFs, could present attractive buying opportunities for investors looking to capitalize on the market downturn.



Read more at NASDAQ: DeepSeek AI Fears Overrated? ETFs in Focus