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Chip stocks tick back up in Tuesday's pre-market trading, a first step in recovering from Monday's DeepSeek AI-driven tech sell-off. The ripple effect the Chinese startup's newest artificial intelligence model had on the wider landscape has left investors concerned about Big Tech's spending on AI and potential overconcentration in the sector as a whole.
T. Rowe Price's Global Technology Fund portfolio manager Dom Rizzo joins Morning Brief to suggest that while short-term consolidation may occur, the medium-term outlook remains strong after the DeepSeek shakeup.
"Well, if you think about what's happened, DeepSeek really gave this incredible innovation to the world in terms of model efficiency by open-sourcing their V3 and their R1 models… And quite naturally, the first market reaction is, 'oh my gosh, GPU utilization is getting better, memory utilization is getting more efficient.' That must mean that AI spending goes down."
While the DeepSeek reaction "actually implies that compute intensity and GPU intensity could go up [in the medium term]," Rizzo states. "So I think it still remains to be seen."
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He also highlights that the future and rate of AI spending is really "a business model question" for the biggest hyperscalers. He sees companies like Nvidia (NVDA) benefiting from the increasing compute needs tied to AI, while others tech players may scale back their investments.
To watch more expert insights and analysis on the latest market action, check out more Morning Brief here.
This post was written by Josh Lynch