China’s low-cost AI model, DeepSeek, has caused significant declines in major U.S. tech stocks like Nvidia (NVDA), marking a $592.6 billion drop in market value on Monday alone. Despite this direct threat to their AI businesses, investors remain cautious and have not bet against leading U.S. tech companies.
The lack of panic among investors can be attributed to several factors. First, the competitive advantage of U.S. Big Tech firms in AI development has shifted from capital-intensive computing power to applications requiring less investment. This makes it easier for these companies like Oracle (ORCL) and Microsoft (MSFT) to maintain their dominance despite facing growing competition.
Second, specific stocks are not considered highly shorted yet, even as DeepSeek directly threatens major players. For instance, Nvidia’s short interest is only 1.17% of its shares outstanding, while broader market trends suggest a potential decline in the S&P 500 of around 2-3%. Analysts predict Nvidia will deliver $2.95 per share in 2025, up 127% from 2024, further mitigating short-term risks for investors.
The most heavily shorted stock among those affected is Micron Technology (MU), with nearly 4% of its shares shorted following the DeepSeek news. However, even this level of short interest may not prompt immediate selling pressure due to the long-term growth potential of U.S. tech firms and their competitive advantages in AI applications.
Analysts suggest that while DeepSeek poses a significant threat, it is unlikely to fundamentally alter the leadership or performance trajectory of U.S. tech giants like AMD (AMD), Cisco Systems (CSCO), and Applied Materials (AMAT). For now, investors appear content with these established companies, avoiding the risks associated with emerging threats in the AI space.
Source: https://www.investors.com/etfs-and-funds/sectors/sp500-how-many-investors-are-crazy-enough-to-short-nvidia