AI Selloff Raises Concerns Over US Tech Valuations as China's DeepSeek Enters the Scene

Abstract:

The arrival of China's DeepSeek, an open-source AI model, has sparked concerns among investors over the valuation of US tech stocks. Market participants weigh in on the potential impact and provide insights into the AI landscape.

Key Points:

* Shares of Nvidia and ASML have dropped significantly, indicating investors' willingness to cash out.
* Nasdaq 100 trades at a premium valuation compared to its historical average.
* Uncertainty over AI dominance in the US and interest rate policies weighs on market outlook.
* Earnings announcements from tech giants will be closely watched for sentiment.

Market Reactions:

* Paul Nolte, Murphy & Sylvest Wealth Management: Calls it a "wake-up call" and urges investors to reassess AI valuations.
* Chris Murphy, Susquehanna International Group: Predicts a shift in sentiment from US-AI to China-tech.
* Mark Malek, Siebert: Believes long-term AI growth remains strong despite short-term volatility.
* Dennis Debusschere, 22V Research: Highlights potential risks but downplays macro impact.
* Rob Almeida, MFS Investment Management: Questions the return on investment for AI chips and predicts a slowdown in demand.
* Florian Ielpo, Lombard Odier Investment Managers: Emphasizes elevated valuations of Nasdaq companies and warns of disproportionate market reactions.

Analyst Perspectives:

* Nicolas Domont, Optigestion: Believes the market is overreacting and sees opportunities for entry in case of a prolonged correction.
* Karen Kharmandarian, Thematics AM: Notes the surprise factor and suggests investors are reducing positions ahead of earnings.
* Nori Chiou, White Oak Capital Partners: Acknowledges attention paid to smaller models but downplays the impact of DeepSeek's breakthrough.
* Manish Kabra, Societe Generale SA: Recommends the S&P 500 equal-weighted index as a way to reduce the impact of tech heavyweights.
* Ben Uglow, Oxcap Analytics: Expects multiple small companies to test DeepSeek's open-source product, potentially challenging existing models.
* Kok Hoong Wong, Maybank Securities: Expresses concerns about DeepSeek's potential impact on Nvidia's dominance and other AI providers.