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Weekly Market Update

DeepSeek’s Shifting Dynamics

DeepSeek's AI innovation led to a 17% drop in Nvidia stocks, signaling reduced demand for advanced chips. While value stocks showed resilience, growth stocks reacted negatively. The broader US market remained relatively unaffected, reflecting tech's widening accessibility.

5 min read
Head of North American Investment Strategy & Research
Senior Investment Strategist
Investment Strategy & Research Specialist

The past week has seen a turbulent market, driven mainly by AI uncertainties out of China. The threat comes from a company named DeepSeek, which is enhancing AI capabilities, reducing barriers to entry, and making cutting-edge technology more affordable, efficient, and accessible to a larger audience. On Monday, the market reacted harshly to semiconductor giant Nvidia (NVDA), an AI darling, which was down 17% on the basis that DeepSeek’s efficiency means less demand for advanced chips. However, what’s interesting is that much of the rest of the US market didn’t have a negative reaction. As the technology evolves and becomes cheaper to implement, it becomes in reach of more companies.

Weekly Market Update Jan 31 2025

In some ways, this represents our overall view of US equities this coming year. Similar to how this technology is rounding out across more companies and industries, we see a rounding out of earnings to the broader market, making it less reliant on the heavy hitting Magnificent 7 alone. The chart above shows the YTD performance of the Russell 1000 Growth vs Value, and although only a one month lookback, both still show positive returns while the more cyclically exposed Value style has outperformed. Notably, notice how the Value index didn’t have the same negative reaction to the DeepSeek news. For a deeper look at our AI views given recent developments, please look at our latest piece from our Chief Strategist Jenn Bender here.

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