The surprise launch of the beach-ball sized Sputnik rattled Americans and had some people comparing the event to the Pearl Harbor attack in 1941.
“Now, somehow, in some new way, the sky seemed almost alien,” said then-Senate Majority Leader and later U.S. President. Lyndon B. Johnson. “I also remember the profound shock of realizing that it might be possible for another nation to achieve technological superiority over this great country of ours.”
Russia went on to send the first man and first woman into space as well as the first probe to impact the moon. But America took one giant leap in 1969 by landing the first man on the lunar surface.
Decades later, the U.S. is facing another so-called Sputnik moment.
The tech sector took a flying kung-fu kick recentlywhen Chinese startup DeepSeek launched its latest AI model, which the company said performs just as well or better than industry-leading models in the U.S. but at a fraction of the cost.
Capital-spending plans for the biggest U.S. providers of cloud services and infrastructure, including Microsoft (MSFT) , Amazon (AMZN) , Google parent Alphabet (GOOGL) and Facebook parent Meta Platforms (META) , have soared over the past year and are set to reach at least $300 billion over the next one.
DeepSeek rocketed to the No. 1 spot in app stores the world over, topping U.S.-based AI chatbot ChatGPT. And investors just as quickly dumped shares of some of the biggest names in the tech world, including AI-chip mammoth Nvidia (NVDA) , which saw its shares tumble 17% on Jan. 27.
George Kurtz, co-founder and CEO of Crowdstrike, said the company 'turned crisis into a customer-trust-building opportunity.' Photo: Patrick T. Fallon/Bloomberg via Getty ImagesBloomberg/Getty Images
Analysts express doubts about DeepSeek costs
Broadcom (AVGO) and Taiwan Semiconductor (TSM) also posted double-digit losses.
"Never in market history has the introduction of a product from a single company had such a profound impact," James "Rev Shark" DePorre said in his TheStreet Pro column.
"Trillions of dollars in market cap were lost, and Nvidia alone lost more than $589 billion, a record for a single stock."
"The market hates uncertainty and DeepSeek delivered a truckload," he added.
DePorre said that DeepSeek's effects on the development of other AI models and on semiconductors and data centers was as yet unclear.
"The only thing that is clear is that AI is going to be extremely competitive, and the U.S. was wrong to underestimate China," he said.
Analysts at Bernstein raised doubts about DeepSeek’s bargain-basement price tag, saying in a research report that “we believe that DeepSeek DID NOT ‘build OpenAI for US$5 million.'”
“The models look fantastic but we don’t think they are miracles; and the resulting Twitterverse panic over the weekend seems overblown,” the investment firm said, according to Economic Times.
Hedge-fund manager Doug Kass wrote in his TheStreet Pro column that "disruptive technology is often, itself, disrupted."
"This is the DeepSeek message to me," he said. "Moreover, in the fullness of time, DeepSeek is not likely to be the only disruptor to AI's monopoly-like price umbrella."
And then the disrupter was disrupted when DeepSeek got deep-sixed by a cyberattack, which began on Jan. 3 and reached a peak on Jan. 27 and 28.
DeepSeek said it would temporarily limit user registrations “due to large-scale malicious attacks” on its services, though existing users would be able to log in as usual, CNBC reported.
Yuyuan Tantian, a social-media account affiliated with Chinese state broadcaster CCTV, claimed the attacks originated from IP addresses in the U.S.
Veteran trader says CrowdStrike top pick
Amid all the turmoil and handwringing, there was a bright spot.
While a number of tech groups were tanking, CrowdStrike (CRWD) and other cybersecurity companies saw their shares climb.
Stephen "Sarge" Guilfoyle has been tracking the cybersecurity stocks so far in 2025. He said in his Jan. 29 column that the financial media have not been covering the runup.
"I mean, we knew it had to happen," he said. "The environment created by the internet, and then the cloud, and now by artificial intelligence has pushed cybersecurity software from the 'in demand' category into the 'inelastic demand' category."
Guilfoyle, whose career dates back to the floor of the New York Stock Exchange in the 1980s, said that in 2025 no business, and no household, can run without investment in securing its data and sensitive information.
"I have long written that CrowdStrike Holdings was my top pick in the space as that firm offers what is, in my opinion, a 'best-in-class' service," he said, as he reiterated his $445 price target.
CrowdStrike took a beating last year when the company distributed a faulty update to its Falcon Sensor security software, which caused widespread problems with Microsoft (MSFT) Windows computers running the software.
Airlines, airports, banks, hotels, and hospitals were among those hurt by what has been called the largest outage in the history of information technology.
But CrowdStrike has regained much of its market value. The shares are up nearly 31% from a year ago and hit an all-time high on Jan. 28.
George Kurtz, co-founder, president, and chief financial officer, told analysts in November that “we turned crisis into a customer-trust-building opportunity.”
"Even after last year's debacle that involved Microsoft and a number of major companies across a host of industries," Guilfoyle said, "I maintained that view and discussed taking off some risk and adding it back on at what I thought were better points of entry or reloading."
He said that CrowdStrike's stock is now the third-largest allocation on his most active book and is not that far away from being No. 2.
CrowdStrike is scheduled to report fourth-quarter earnings in March, and Guilfoyle said the Austin company was expected to earn 86 cents per share on $1.03 billion in revenue.
"That would be down from 95 cents for the year-ago comparison," he said. "Remember the business was peaking last year ahead of the summertime problems that forced a recovery.
"That said, this sales expectation would still be good for annual growth of about 22.4%," Guilfoyle added.
