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Analyst sees investment opportunities as China's AI push rattles U.S. markets
As the U.S. tech sector reacts to China's DeepSeek AI model, Societe Generale is advising investors to focus on long-term secular themes that emphasize America-First strategies, such as the S&P 500 Equal Weight Index, which has higher allocations to industrials, utilities, and financials over technology.
Analyst Manish Kabra noted that the "Magnificent 5"Nvidia (NASDAQ:NVDA), Microsoft (NASDAQ:MSFT), Alphabet's Google (NASDAQ:GOOGL) (NASDAQ:GOOG), Amazon (NASDAQ:AMZN), and Meta (NASDAQ:META)have collectively added 700 points to the S&P 500 over two years. Without them, the index would be 12% lower today.
Kabra downplayed concerns over DeepSeek AI's cost-efficient models, arguing that while they raise questions about U.S. hyperscalers' capital spending, cheaper AI production could still benefit the sector. He also cited Bernstein analyst Stacy Rasgon, who dismissed panic over DeepSeek's impact, stating its models are strong but not revolutionary.
Kabra added that rising bond yields have contributed to market volatility, but a strong bond market should support the broader S&P 500.
This article first appeared on GuruFocus.