Spotlight on Deepseek stock: What to expect?
by Robin Hartingdon
DeepSeek, a rising force in AI, has sent shockwaves through the US stock market with its cost-effective AI (artificial intelligence) models. While DeepSeek’s rise has captured market attention, it remains to be seen how sustainable its competitive edge will be. Unlike its Western counterparts, DeepSeek developed its AI using only $6 million in computing costs, challenging the dominance of Nvidia and other big tech firms.
This sparked a major sell-off in the tech sector. Nvidia, AMD, Broadcom, and other AI-linked stocks saw declines, highlighting the growing uncertainty around AI's future power players.
This article will discuss what traders can expect from the DeepSeek stock.
Impact on Nvidia and the 'Magnificent Seven' stocks
DeepSeek’s emergence has sent ripples through the AI sector, significantly impacting Nvidia and other 'Magnificent Seven' stocks like Alphabet and Microsoft. Nvidia, which dominates the AI chip market, saw its shares plummet by 17%, wiping out nearly $600 billion in market capitalization. This drop underscores concerns that AI innovation may no longer be confined to US tech giants.
DeepSeek’s emergence has sent ripples through the AI sector, significantly impacting Nvidia and other 'Magnificent Seven' stocks like Alphabet and Microsoft. Nvidia, which dominates the AI chip market, saw its shares plummet by 17%, wiping out nearly $600 billion in market capitalization. This drop underscores concerns that AI innovation may no longer be confined to US tech giants.
DeepSeek developed its R1 model with just $6 million in computing costs, leveraging only 2,000 Nvidia H800 chips. This was a far cry from OpenAI and Google's multibillion-dollar AI budgets. This challenges the assumption that cutting-edge AI requires expensive, high-end chips, potentially threatening Nvidia's market dominance.
The broader AI sector also felt the impact. Alphabet (Google) dropped 4.03%, while Microsoft fell 2.14%. However, Apple and Amazon managed gains, suggesting selective investor reactions. DeepSeek's rise raises strategic questions for US policymakers, with Trump's $500 billion AI initiative aiming to counter China's AI progress.
While Nvidia and Silicon Valley giants still lead in AI infrastructure, DeepSeek's breakthrough signals a shift in the global AI race. If cost-effective AI DeepSeek models continue to emerge, valuations of AI-linked stocks may face increased scrutiny in the coming months.
Market reaction: Nasdaq and S&P 500 turbulence
The stock market experienced sharp turbulence as regulatory pressures on Google and rising competition in AI technology shook investor confidence. The Nasdaq Composite and S&P 500 saw significant declines, with Google's parent, Alphabet, dropping over 4% amid concerns over a potential breakup in January 2025.
The stock market experienced sharp turbulence as regulatory pressures on Google and rising competition in AI technology shook investor confidence. The Nasdaq Composite and S&P 500 saw significant declines, with Google's parent, Alphabet, dropping over 4% amid concerns over a potential breakup in January 2025.
Under President Donald Trump's administration, the Justice Department (DOJ) eased its stance on Google's AI investments, allowing the company to retain its stake in Anthropic. However, it insisted that Google must divest its Chrome browser to promote search competition.
Meanwhile, broader market value instability emerged as a Chinese AI firm, DeepSeek, introduced a competitive AI model using cheaper chips and less financial data. This raised fears about potential threats to US chipmakers like Nvidia and Broadcom and cast doubts on the sustainability of Big Tech's earnings growth. Nvidia, a key driver of the recent bull market, saw significant losses, dragging down major indexes.
Experts warn that a slowdown in Big Tech's dominance could shift the market dynamic, offering opportunities for stock pickers but slowing overall index gains. If tech industry earnings estimates decline, the market rally may broaden, favoring a wider range of stocks rather than a handful of industry leaders.
[b]DeepSeek's IPO status and public trading
40% concentration risk exposed to big techs[/b]
With Big Tech dominating 40% of the S&P 500, any disruption can trigger market-wide volatility. DeepSeek's potential IPO and entry into public trading could intensify competition in AI, directly impacting giants like Nvidia, Microsoft, and Alphabet. Investors fear a shift in market dynamics, which could weaken the stranglehold of US big tech on AI innovation.
40% concentration risk exposed to big techs[/b]
With Big Tech dominating 40% of the S&P 500, any disruption can trigger market-wide volatility. DeepSeek's potential IPO and entry into public trading could intensify competition in AI, directly impacting giants like Nvidia, Microsoft, and Alphabet. Investors fear a shift in market dynamics, which could weaken the stranglehold of US big tech on AI innovation.
Earnings slowdown risk on board
Despite big tech's dominance, earnings growth is expected to slow in 2025, raising concerns about stock valuations. The DeepSeek-driven market turbulence has reinforced fears that the rapid AI-fueled rally may not be sustainable. Investors are now reassessing whether big tech's strong earnings momentum can continue in a competitive landscape where DeepSeek could be traded publicly.
Despite big tech's dominance, earnings growth is expected to slow in 2025, raising concerns about stock valuations. The DeepSeek-driven market turbulence has reinforced fears that the rapid AI-fueled rally may not be sustainable. Investors are now reassessing whether big tech's strong earnings momentum can continue in a competitive landscape where DeepSeek could be traded publicly.
Big tech earnings expected to jump 24% YoY
While big tech's earnings are forecasted to rise 24% YoY in Q3 2025, DeepSeek's IPO could disrupt this trajectory. A public debut might shift investor sentiment, attract capital, and challenge Big Tech's AI dominance. If DeepSeek gains market share, companies like Nvidia and Alphabet may need to moderate growth expectations to maintain investor confidence.
While big tech's earnings are forecasted to rise 24% YoY in Q3 2025, DeepSeek's IPO could disrupt this trajectory. A public debut might shift investor sentiment, attract capital, and challenge Big Tech's AI dominance. If DeepSeek gains market share, companies like Nvidia and Alphabet may need to moderate growth expectations to maintain investor confidence.
Market concentration risks
Since the AI market is heavily concentrated in a few big tech firms, Nvidia, Microsoft, and Alphabet lead the sector. Nvidia's dependency on hyperscalers like Microsoft (35% of spending on Blackwell chips) and Google (32.2%) raises concerns about sustainability.
Since the AI market is heavily concentrated in a few big tech firms, Nvidia, Microsoft, and Alphabet lead the sector. Nvidia's dependency on hyperscalers like Microsoft (35% of spending on Blackwell chips) and Google (32.2%) raises concerns about sustainability.
If these firms cut AI spending, Nvidia's stock and overall AI company infrastructure investments could face a downturn. DeepSeek's IPO and public trading entry signal rising competition, potentially shifting market dynamics. Investors may reallocate funds if DeepSeek's AI models reduce reliance on Nvidia's GPUs. This could affect Nvidia's valuation and reinforce concerns about the concentration risk in the AI sector.
Hyperscalers to sustain growth
Microsoft, Alphabet, and Amazon plan to invest $80-$100 billion in AI infrastructure to sustain growth. However, DeepSeek's IPO debut could introduce a new AI player, influencing market expectations and capital allocation.
Microsoft, Alphabet, and Amazon plan to invest $80-$100 billion in AI infrastructure to sustain growth. However, DeepSeek's IPO debut could introduce a new AI player, influencing market expectations and capital allocation.
If DeepSeek gets strong public backing, hyperscalers might diversify AI chip suppliers, reducing their dependence on Nvidia. This could pressure Nvidia's stock while also expanding AI investment opportunities as public market investors weigh Nvidia's GPU dominance against emerging AI efficiency models like DeepSeek's R1.
DeepSeek's R1 model – threat vs. overreaction
DeepSeek's R1 model raised alarms as it demonstrated efficiency without requiring vast Nvidia GPU resources. This led to a $600 billion market cap loss for Nvidia, as investors feared reduced AI hardware demand.
DeepSeek's R1 model raised alarms as it demonstrated efficiency without requiring vast Nvidia GPU resources. This led to a $600 billion market cap loss for Nvidia, as investors feared reduced AI hardware demand.
However, Nvidia is arguing that more GPUs will be needed for inference scaling, where AI generates responses. CEO Jensen Huang maintains that AI's evolution still depends on scaling compute power. This makes R1 more of an industry evolution than an existential threat to Nvidia's long-term dominance.
What to Expect from Market Trends in AI, Big Tech, and Sector Shifts
The AI sector's volatility, driven by DeepSeek's emergence and Nvidia's losses, raises doubts about big tech's dominance. Any disruption could broaden the market rally by shifting investor focus to diverse sectors.
The AI sector's volatility, driven by DeepSeek's emergence and Nvidia's losses, raises doubts about big tech's dominance. Any disruption could broaden the market rally by shifting investor focus to diverse sectors.
If AI-linked stocks struggle with earnings slowdowns, capital may flow into underperforming industries. However, if big tech maintains 24% YoY earnings growth, it could sustain its lead. The DeepSeek IPO's market reception will also be a key factor in shaping 2025's rally trajectory.
Disclaimer:
Blueberry Markets (Mauritius) Ltd (Mauritius Company Number 218548) holds Global Business Licence GB24203929 under the Financial Services Act allowing it to be a Full Service Dealer (excluding underwriting). Registered address: Silicon Avenue, 40 Cybersecurity The Cyberati Lounge, Ground Floor, The Catalyst, Ebene 72201, Mauritius.Blueberry Markets (V) Ltd is regulated by Vanuatu Financial Services Commission (Company number: 700697) holding License Classes A, B and C under the Financial Dealers Licensing Act. Registered Address: Govant Building, 1st Floor, Kumul Highway, Port Vila, Vanuatu.Blueberry Prime Partners Pty Ltd. Registered Address: Level 7, 107 Mount Street, North Sydney NSW 2060 Australia. Payment processing facilitated by Blueberry Prime Partners Pty Ltd ABN 57 140 275 860 AFSL 36411.Margin trading involves a high level of risk and is not suitable for all investors. You should carefully consider your objectives, financial situation, needs and level of experience before entering into any margined transactions with Blueberry Markets, and seek independent advice if necessary. Forex and CFDs are highly leveraged products, which means both gains and losses are magnified. You should only trade in these products if you fully understand the risks involved and can afford to incur losses that will not adversely affect your lifestyle.
Publication date: