Nvidia Sell-Off: Analysts Downgrade Fears Over Open-Source AI Model
Market Impact
* Nasdaq (^IXIC) closed down 3% as investors sold off tech stocks.
* Nvidia (NVDA) led the decline, plunging 16.9% and erasing $589 billion from its market cap.
* Chip stocks like Broadcom (AVGO), Lam Research (LRCX), and Marvell (MRVL) also fell.
* Magnificent Seven members Microsoft (MSFT) and Alphabet (GOOGL) dropped 2% and 4%, respectively.
DeepSeek's Impact on AI Dominance
* China's AI startup DeepSeek unveiled an open-source language model, raising concerns about US AI dominance.
* This triggered panic selling among investors, who fear the model could lower the cost of AI infrastructure.
Overblown Reaction?
* Analysts believe the market's reaction is exaggerated.
* Bernstein's Stacy Rasgon dismisses concerns, stating that the development does not spell "doomsday for AI infrastructure."
* Futurum's Daniel Newman echoes this view, noting that a more efficient model like DeepSeek could actually expand AI use.
Jevons Paradox: Increased Efficiency Leads to Increased Demand
* Microsoft CEO Satya Nadella highlights the Jevons Paradox, which states that as AI becomes more efficient, its use will increase.
* This suggests that increased productivity and reduced costs could benefit tech companies in the long run.
Macroeconomic Outlook Remains Constructive
* Principal Asset Management's Seema Shah downplays correction fears, citing a positive macro environment.
* She believes the DeepSeek development has the potential to enhance global productivity across all sectors.
Market Performance
* Nasdaq closed down 3% on Monday.
* S&P 500 (^GSPC) dropped 1.5%.
* Dow Jones Industrial Average (^DJI) reversed losses, ending up 0.65%.