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Key Takeaways
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AI stocks had a volatile week as Wall Street reckoned with the implications of a sophisticated, cost-efficient AI model from Chinese start-up DeepSeek.
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Semiconductor stocks such as Nvidia and Broadcom sold off on Monday as investors worried DeepSeek's efficiencies would temper enthusiasm for AI infrastructure spending. High-flying networking and power stocks also tumbled.
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Software stocks advanced on expectations that their margins and demand for their AI products will improve as AI becomes less expensive to run.
AI stocks were this past week when Wall Street took notice of a high-performance, shockingly efficient open-source AI model from Chinese start-up DeepSeek.
The high-performance model, which DeepSeek said was trained in a matter of months for about $6 million, sparked concern that useful AI may not require the most powerful and most expensive hardware. It also threatened to undercut the investment thesis that has so far prevailed among U.S. tech companies: spend aggressively to build computing capacity and develop the most powerful models.
A sell-off of semiconductor and computer networking stocks on Monday was followed by a modest rebound, but DeepSeek’s damage was still evident when markets closed Friday. Below, we look at some of the winners and losers of the reckoning of the past week.
Nvidia
Nvidia (NVDA), the undisputed winner of the AI craze, was the undisputed loser of the DeepSeek panic.
Shares tumbled 17% on Monday, their biggest one-day drop since March 2020 when it became evident Covid-19 would upend daily life around the world. The chip giant’s market cap, which stood at $3.6 trillion before last week, shrank by nearly $590 billion, the largest loss of market value for a single company on record.
DeepSeek, some investors thought, could force U.S. tech giants to refocus their efforts on making more nimble, efficient AI models, and subsequently reduce their spending on Nvidia’s most sophisticated chips. Analysts were generally skeptical of that narrative. Bank of America analysts argued DeepSeek could be “AI’s Sputnik moment” that fuels even more AI investment beneficial to Nvidia.
But some saw reason to be wary. Morgan Stanley analysts wrote that “the stock market reaction is probably more important than the cause,” and warned DeepSeek’s success could temper AI spending enthusiasm and compel the Trump administration to ratchet up semiconductor export controls.
Nvidia stock, despite recovering some of Monday’s losses, finished the week 16% lower.
Meta Platforms
Shares of Meta (META) climbed 6.4% last week, making it the best performer among the Magnificent Seven.