Market news 28 jan
DeepSeekgedon: New Challenges and Changes for AI
The modern financial world has once again showcased its dynamism. Amid global developments, the tech sector experienced significant turbulence, while other industries displayed unexpectedly positive results. Let’s break down the key movements and their causes.
Tech Under Pressure: A Challenge from Chinese AI
The Chinese open-source AI model DeepSeek-R1 has made a major impact, forcing investors to reassess the prospects of American tech giants. Its main advantage lies in its cost-effectiveness and open-source nature, which could potentially shift the balance of power in the AI market.
As a result, Nvidia (NVDA) shares plummeted by 17%, losing a staggering $589 billion in market capitalization. Investors are concerned about reduced AI spending and lower demand for the company's high-performance GPUs. However, Nvidia asserts that such models still require significant computational power, ensuring continued demand for their products.
Other major players, such as Broadcom (AVGO), AMD (AMD), and Qualcomm (QCOM), also faced drops ranging from 10% to 19%. DeepSeek's cost-efficient approach could reshape the market, compelling analysts to revisit their forecasts.
Pat Gelsinger on Market Reaction
Former Intel (INTC) CEO Pat Gelsinger criticized the market's reaction to DeepSeek, suggesting that the negative sentiment may be premature. He argued that the lower-cost approach could actually expand the AI market, making the technology accessible to a broader audience. Gelsinger highlighted that such a model challenges the high-cost paradigm of AI development, potentially paving the way for more widespread adoption.
Apple: Resilience Amid Changes
Contrary to the broader trend in the tech sector, Apple (AAPL) showed a 1.5% increase. The company has taken a cautious stance, avoiding large AI investments while partnering with established players like OpenAI. This strategy has allowed Apple to maintain its position and shield itself from immediate risks posed by new challenges.
Sector Trends and Index Performance
The PHLX Semiconductor Index fell by 9.2%, reflecting overall pessimism in the sector.
Meanwhile, the Dow Jones rose by 0.7%, indicating a shift of capital into more stable assets.
Six out of 11 sectors in the S&P 500 ended the day with gains.
On the NYSE, advancing stocks outnumbered declining ones by a ratio of 3:2, while the Nasdaq saw the opposite trend.
Bond Market: A Cautious Approach
Investors shifted their focus to safer assets like government bonds.
The 10-year Treasury yield fell to 4.53%.
The 2-year Treasury yield dropped to 4.19%.
Global Markets and Commodities
Global markets also displayed mixed performance:
Europe: The FTSE remained unchanged, while the DAX fell by 0.5%.
Asia: The Nikkei declined by 0.8%, while the Hang Seng showed no significant movement.
Oil prices dropped to $73.15, and gold fell by $39.00 per ounce, reflecting growing uncertainty in the markets.
What’s Next?
Key companies, including Apple and Microsoft, are set to release their financial reports soon, which could alter the current market sentiment. Investors are eagerly awaiting updates to adjust their strategies amid new challenges, such as the DeepSeek model.
The current dynamics highlight the importance of diversification and adaptability in rapidly changing conditions. Focus should be placed on emerging technologies, their market impact, and the opportunities they present for crafting new investment strategies.