How deep a problem for wealth managers – and the bull market – is DeepSeek?
Investors woke up on Monday to a sea of red on their screens thanks to a year-old Chinese startup that may or may not revolutionize the already revolutionary AI space. A report that DeepSeek’s AI models could offer comparable performance to the world’s best chatbots at a fraction of the power and energy costs sent the S&P 500 spiraling down about 2 percent.
DeepSeek’s potential emergence sent global technology tumbling, including chipmaker and market darling Nvidia (Ticker: NVDA) which fell more than 12 percent to start the day.
Not to worry, said Nancy Tengler, CEO & CIO of Laffer Tengler Investments. In her view, DeepSeek will not deep-six the technology powerhouses that took the market higher.
“Let's assume for argument's sake, the headlines are correct and the headlines are what the algos and hedge funds are trading off this morning, our suspicion is that DeepSeek will be good for many, if not all, US companies. Lowering the price will increase demand. And companies like Nvidia and Broadcom (Ticker: AVGO) are already diversified or diversifying their offering,” Tengler said.
Tengler added that so-called hyperscalers like Meta Platforms (Ticker: META) have likely not been blindsided by DeepSeek’s capabilities and have already factored it into their CapEx spending plans.
“These companies have deep pockets and talent. You heard no doubt that META has set up war rooms to analyze DeepSeek,” Tengler said. “We will soon find out if all the claims are true, and it is my expectation that we will also learn how quickly US firms can adapt.”
Mark Klein, CEO of SuRo Capital, edged toward this more positive outlook as well, saying DeepSeek's efficient training methods could reduce the demand for high-end Nvidia GPUs, but the more cost-effective approach could also result in more demand for hardware for those looking to train proprietary models.
“Even if training costs decrease, companies might still invest in more powerful systems for incremental performance gains, rather than minimizing costs for equivalent results," Klein said.
Despite the selloff in technology shares, widely watched Wall Street technology analyst Daniel Ives from Wedbush Securities also piled onto the bull case, saying on X that “at the end of the day there is only one chip company in the world launching autonomous, robotics, and broader AI use cases, and that is Nvidia.”
“Launching a competitive LLM model for consumer use cases is one thing. Launching broader AI infrastructure is a whole other ballgame, and nothing with DeepSeek makes us believe anything different,” Ives posted.
Meanwhile, Giuseppe Sette, president of technology market research firm Reflexivity, also saw the glass being half full. Sette said that even though market participants might be shocked today, the appearance of DeepSeek on the scene is “extremely bullish in the long term” because it opens the way for deeper and broader adoption of AI at all scales.
"DeepSeek has taken the market by storm by doing more with less,” Sette said. “In layman terms, they activate only the most relevant portions of their model for each query, and that saves money and computation power. This shows that with AI the surprises will keep on coming in the next few years.”
Finally, Bo Fifer, lead portfolio manager of the TCW Artificial Intelligence ETF (Ticker: AIFD), said Monday’s selloff is more about cost than a true upending of the AI space, and will ultimately prove to be a “good thing” for the technology sector.
“Through scaling, new architectures, or purpose-built models, we have long expected the cost of AI to fall over time. In fact, that's necessary for AI to reach into all sectors of the economy and disrupt industries in the ways we think it eventually will. As the cost continues to decline, more use cases will become economically viable, and the technology will find its way into more devices,” Fifer said.
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