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AI Stocks Decline Amid DeepSeek’s Emerging AI Model

by January 28, 2025
written by January 28, 2025

On January 27, 2025, U.S. stock markets experienced notable fluctuations as investors anticipated the Federal Reserve’s forthcoming interest rate announcement. The S&P 500 index decreased by 1.5%, primarily due to a significant downturn in technology stocks, while the Nasdaq Composite saw a more substantial decline of 3.1%. In contrast, the Dow Jones Industrial Average managed a modest gain of 0.7%. 

A key factor contributing to the tech sector’s decline was the emergence of a new AI application from Chinese startup DeepSeek. This application has surpassed OpenAI’s ChatGPT on Apple’s platform, leading to concerns about the profitability of existing AI market leaders. Consequently, several AI-related stocks faced notable losses:

Nvidia Corporation: The semiconductor giant’s stock plummeted nearly 17%, resulting in a record $589 billion loss in market capitalization.  
Broadcom Inc.: Experienced a decline of approximately 8.9%.  
Microsoft Corporation: Shares fell by around 4%.  
Alphabet Inc. (Google’s parent company): Saw a decrease of over 4%.  

DeepSeek’s AI model, developed at a fraction of the cost compared to its U.S. counterparts, has raised concerns about the future profitability of established AI companies. The model was built without top-tier foreign processors restricted by U.S. export curbs, reportedly costing under $6 million to develop. This contrasts with the billions spent by U.S. firms like OpenAI and Meta Platforms. 

Despite the downturn in technology and AI sectors, other industries demonstrated resilience. Notably, American Water Works, AT&T, and HCA Healthcare reported gains, buoyed by positive financial reports and strategic initiatives.

Investors are now closely monitoring the Federal Reserve’s forthcoming decisions, as well as developments in the AI industry, to assess potential impacts on the broader market.

The post AI Stocks Decline Amid DeepSeek’s Emerging AI Model appeared first on FinanceBrokerage.

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