A new AI model from China, DeepSeek Al, has sent shockwaves through Wall Street, causing a sharp decline in tech stocks like Nvidia. The breakthrough model delivers results comparable to OpenAI’s best model while using significantly less computing power.
The implications are substantial, with Nvidia stock losing nearly $600 billion in market value in one day. However, the news also offers opportunities for investors. If large language models from companies like Anthropic and Meta adopt DeepSeek’s techniques, they may become more efficient, reducing their need for computing power.
This event highlights the dangers of market concentration, with mega-cap tech companies dominating the stock market. The top five stocks in the S&P 500 made up about 29% of the index as of December 31, and they’re all highly exposed to similar technology trends.
Investors can take several lessons from this event:
1. Be cautious of market concentration: Investors may not be as diversified as they believe, with a high concentration of mega-cap tech companies dominating the market.
2. The AI story has layers: DeepSeek Al’s breakthrough model is not just a threat to Nvidia but also an opportunity for software companies and other adopters of AI technologies.
3. Crypto is no safe haven: Cryptocurrencies are highly correlated to tech moves, making them a high-risk investment during times of market volatility.
4. Don’t count out Apple: The company’s decision not to spend on large language models may be a good move, as it focuses on leveraging ChatGPT’s AI model and edge computing.
5. Cheap AI could fuel a bond-market rally: A more efficient AI model could lead to higher productivity and lower inflation, sparking a potential rally in the bond market.
Source: https://markets.businessinsider.com/news/stocks/tech-stock-crash-deepseek-lessons-ai-concentration-nvidia-bonds-crypto-2025-1