Advancements by Chinese AI start-up DeepSeek recently roiled tech stocks and wider markets, as it prompted concerns about the level of spending in this space by major US companies.
DeepSeek develops open-source large language models and its app had climbed up the download charts, with the company recently launching its R1 model.
The start-up claimed that the new model offers "performance on-par" with the OpenAI o1 model. DeepSeek also said that its AI assistant runs off lower cost chips and uses less data than leading models.
The release of its more cost-effective AI model spooked investors in US Big Tech, which have been pumping large sums of money into developing their own offerings using this technology.
Recently reinstated US president Donald Trump announced a $500bn (£403bn) venture to build AI infrastructure in the US, using private sector investment from the likes of ChatGPT-creator OpenAI, Oracle (ORCL) and Japanese conglomerate SoftBank (9984.T). Microsoft (MSFT) and Nvidia (NVDA) were also announced as the tech companies that are among the key initial technology partners in the venture.
In addition, this earnings season has so far seen a mixed set of earnings from the "Magnificent 7" tech giants — made up of Nvidia (NVDA), Apple (AAPL), Meta (META), Microsoft (MSFT), Alphabet (GOOGL, GOOG), Amazon (AMZN) and Tesla (TSLA).
Is the promise of the AI-growth story enough to keep investors hooked on the Mag 7 or has the DeepSeek episode impacted the appeal of these tech behemoths? Here's more on how they've been performing.
Shares in Facebook-owner Meta (META) notched a fresh high after it posted fourth quarter earnings that topped estimates.
Revenue of $48.4bn beat expectations of $46.9bn, while earnings per share of $8.02 came in ahead of estimates of $6.75.
For the year, Meta (META) reported net income of $62.4bn, which is up 59% on the $39.1bn it reported last year.
However, the company guided to revenue of between $39.5bn and $41.8bn in the first quarter. That would represent 8% to 15% growth on the same period last year, while revenue in the fourth quarter was up 21% year-on-year.
Less than a week prior to this earnings release, CEO Mark Zuckerberg announced the company plans to spend as much as $65bn on AI infrastructure projects this year.
Russ Mould, investment director at AJ Bell (AJB.L), said: "Social media giant Meta's (META) quarterly earnings were just what the doctor ordered after DeepSeek infected the big tech space with gloom earlier this week.
"The company is continuing to invest heavily in AI, although whether there will be any change of tack off the back of DeepSeek’s emergence remains to be seen," he said.
Electric vehicle maker Tesla's (TSLA) results disappointed against expectations.
Tesla posted revenue of $25.7bn for the fourth quarter, which was well below the $27.2bn expected by analysts, as well as being up just 2% on the same period in the previous year. Adjusted earnings per share of $0.73, also came in below expectations of $0.75.
For the full-year, Tesla generated revenue of $97.7bn, which was up just 1% on 2023.
Despite these figures, shares rose in the following day's session, with the stock up 93% over the past year, boosted by CEO Elon Musk's role as a close adviser to Trump.
Tesla shares rose the day after the release of fourth quarter results, with the stock up 93% over the past year, boosted by CEO Elon Musk's role as a close adviser to US president Donald Trump. ·The Washington Post via Getty Images
On an earnings call, Musk said that paid, unsupervised full self-driving was coming to Austin, Texas in June.
Mamta Valechha, consumer discretionary analyst at Quilter Cheviot, said: "Tesla’s (TSLA) guidance was vague, stating that it expects to return to growth in 2025, but without providing specific targets. This is a departure from previous years, where Tesla offered clearer outlooks, and consensus expectations of low-teens growth will likely need to be revised down.
"Ultimately, Tesla (TSLA) is still being valued more like a tech company, trading at 120 times earnings, despite the reality of slowing growth."
Dan Coatsworth, investment analyst at AJ Bell (AJB.L), said despite these results, Microsoft (MSFT) "won’t be worried. This is only one set of quarterly results and it’s so engrained into people’s lives that it continues to be one of the biggest beneficiaries of the AI trend."
“Even the emergence of DeepSeek plays to its advantages, though that might not immediately seem to be the case," he said.
"Competition always emerges when a certain area gets hot and bringing down the cost of running AI will broaden its appeal and reach to both consumers and businesses, making more people realise what’s possible. Microsoft’s (MSFT) army of software services are well positioned to help users embrace AI and it’s in the front pack of contenders to win the race."
IPhone-maker Apple (AAPL) also had a mixed update for investors when it reported its first quarter results, despite CEO Tim Cook describing it as the company's "best quarter ever".
Revenue of $124.3bn was slightly ahead of the $124.1bn expected, while earnings per share of $2.40 beat estimates of $2.35.
However, iPhone sales of $69.14bn disappointed against expectations of $71.04bn, though Mac sales of $8.99bn beats forecasts of $7.94bn.
Ben Barringer, technology analyst at Quilter Cheviot, said: "Apple’s (AAPL) broader ambitions now hinge on its new cycle of artificial intelligence, with a slight uptick in engagement following the recent release of Apple Intelligence.
"The market has been getting excited about the implications of DeepSeek, believing that cheaper inference could significantly benefit edge AI," he said. "However, company didn’t fully endorse the idea, leaving some uncertainty around its long-term potential."
"Despite the excitement around emerging AI technologies, Apple’s growth remains more expensive than its peers in the 'Magnificent 7,' suggesting that investors may need to recalibrate their expectations," Barringer added.
Dan Coatsworth, investment analyst at AJ Bell (AJB.L), said: "Previously, large capex would have been taken as a positive sign that Alphabet was doing everything it could to capitalise on the hot AI trend.
"Now the reverse is true. There are fears it might be digging itself a big hole and potentially wasting money if rivals like DeepSeek have shown it is possible to do things a lot cheaper."
China's announcement last week that it launching an anti-trust probe into Google, just moments after trade tariffs implemented by Trump came into effect, also weighed on shares.
E-commerce giant Amazon (AMZN) closed Friday's session 4% in the red, on the back of its latest results release.
While the company's fourth quarter results, released after the bell on Thursday, beat expectations on the top and bottom line, its guidance for Q1 disappointed investors.
Amazon (AMZN) posted fourth quarter revenue of $187.7bn, besting expectations of $187.3bn, and earnings per share of $1.86 also beat estimates of $1.50.
However, the closely-watched revenue for its Amazon Web Services cloud business came in at $28.7bn, which was just short of expectations of $28.8bn.
For the first quarter, Amazon (AMZN) said it expected to generate revenue of between $151bn and $155bn, which was below analyst estimates of $158bn.
In addition, Amazon (AMZN) CEO Andy Jassy said on the company's earnings call that it expected to spend roughly $105bn in capital expenditures in 2025, the majority of which will go toward AI and data center spending.
Coatsworth said: "Investors have got the jitters about the gigantic spending for the jam tomorrow. It doesn’t help that the jam today is not as sweet as they’d like.
"AWS sales growth in the past quarter was a fraction below market expectations, extending a similar trend seen by Microsoft and Alphabet for cloud computing disappointment."
Investors will be looking ahead to chipmaker Nvidia's (NVDA) next results to round off this season's Mag 7 earnings.
Nvidia (NVDA) was the hardest hit by the DeepSeek-tech stocks rout, as shares plunged and wiped $589bn off its market value, marking the largest single-day loss in stock market history.
Shares have started to rebound, though Nvidia (NVDA) is still back behind Apple as the world's second most valuable public company, with a market capitalisation of $3.18tn.
For the fourth quarter, Nvidia (NVDA) has guided to revenue of $37.5bn, plus or minus 2%, which would be just ahead of Wall Street expectations of $37bn.
Derren Nathan, head of equity research at Hargreaves Lansdown (HL.L), said that for the year Nvidia (NVDA) is expected to report revenue of $129bn and earnings per share of $2.95.
"The outlook will be key, and renewed capex commitments by Meta (META), Microsoft (MSFT) and Amazon (AMZN) should help put the perceived threat of DeepSeek into context," he said.
