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NEWS
The DeepSeek Dive: What To Know

China is once again causing problems for U.S. markets, not because of its tepid economic growth but because of its artificial intelligence (AI) advancements. Fears that DeepSeek AI may have leveled the global playing field rocked U.S. tech giants as investors recalibrated their growth expectations to account for competition. Safe-haven stocks and bonds caught a bid as the market awaits a flurry of “Magnificent Seven” earnings and the Fed’s rate decision on Wednesday. 👀

Today's issue covers what we know about China’s DeepSeek AI, how retail is handling today’s wreckage, and other noteworthy pops & drops. 📰

Here’s the S&P 500 heatmap. 7 of 11 sectors closed green, with consumer staples (+2.71%) leading and technology (-4.90%) lagging.

And here are the closing prices: 

STOCKS
AI Fervor Turns Into Fear 😱 

While the U.S. was focused on banning TikTok over national security concerns, China was apparently building an artificial intelligence (AI) weapon of its own…DeepSeek AI.

The Chinese AI company DeepSeek launched its latest AI model last week, naming it R1 and stating that it’s particularly good at problem-solving. However, what blew investors' socks off was the claim that it performs on par with OpenAI’s o1 reasoning model but at a fraction of the cost per use.

That news sent the DeepSeek app to the top of the iPhone download rankings for the U.S. and spiraled the world into a frenzy about how this new entrant could turn the entire AI space upside down. 🙃 

U.S. export controls had intended to hinder Chinese organizations from developing innovative AI by limiting their access to cutting-edge semiconductors. However, DeepSeek appears to have either circumnavigated rules to acquire enough chips…or, more scarily, achieved similar performance with worse tech. 🤯 

Neither situation is a great one, but the latter is what sent semiconductor stocks plummeting. After all, much of their rally has been driven by a race to acquire the most technologically advanced chips at the largest volume…and at basically any price. If cheaper alternatives exist, then growth for these companies will suffer.

Additionally, DeepSeek’s R1 model is open-source, allowing others to adapt and use it for their own purposes. This could create other cheap AI alternatives, further reducing the U.S. chip supply/demand imbalance and pricing power. 📝 

Still, others say that DeepSeek’s ability to cut AI training costs is only one piece of the puzzle. The AI infrastructure industry will continue to grow as tech companies require more computing power, elevating demand for years to come.

Whether DeepSeek will rebalance the world’s AI development playing field remains to be seen. However, many high-flying stocks in the space traded down today on fears that their lead may not be as great as initially thought.

The story below will break down the market action from the day and how the Stocktwits community is playing the dip. But here’s a sneak peak: 🚨 

• Nvidia shares shed $589 billion in market cap value, the largest single-day decline in history (over double its last $279 billion record).

• The U.S. stock market lost $2 trillion in market cap.

• Bitcoin (briefly) broke back below 100k.

Given its rise to prominence, DeepSeek has reportedly been hit with large-scale cyberattacks and other threats, causing it to temporarily limit registrations.

Isn’t it funny how we were all so worried about TikTok having our information but are perfectly fine feeding every living thought we have into a Chinese-owned AI model? Hey DeepSeek AI, what is the meaning of irony? 🤦 

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