Nvidia's Sell-Off: Overblown Panic or Legitimate Concern?
China's AI startup DeepSeek has sparked a sell-off in the tech sector, raising concerns about the US's leadership in artificial intelligence. Nasdaq (^IXIC) closed down 3%, with Nvidia (NVDA) plunging 16.9%, eroding $589 billion from its market cap.
Broader Tech Impact:
The ripple effect impacted chip stocks (AVGO, LRCX, KLAC, MRVL) and tech giants Microsoft (MSFT) and Alphabet (GOOGL), down 2% and 4% respectively. These companies face pressure ahead of Q4 earnings amid reduced profit growth expectations.
Analyst Perspective:
Top analysts view the panic-selling as excessive. Bernstein's Stacy Rasgon believes DeepSeek's development does not signal "doomsday for AI infrastructure." Futurum's Daniel Newman echoes this, citing the Jevons Paradox—where efficiency leads to increased use and innovation.
Recovery and Outlook:
Microsoft CEO Satya Nadella suggests that AI's efficiency will accelerate its adoption. Initial panic subsided as Microsoft and other Big Tech stocks rebounded from their session lows, with Amazon and Meta ending slightly higher.
Broader Market Implications:
Principal Asset Management's Seema Shah downplays correction fears, citing a constructive macro environment. She emphasizes the positive productivity impact of DeepSeek for various sectors and dismisses concerns about the US's exceptionalism in technology.
Market Performance:
Nasdaq closed down 3%, S&P 500 (^GSPC) fell 1.5%, while Dow Jones Industrial Average (^DJI) reversed losses to gain 0.65%.