January 28th 2025

SNOWDEN

Looks like a really bad day for the market.

It’s been a bubble for a long time.

The tech stocks have been the sector that has inflated the entire market and eventually, they will be the ones that pop the bubble.

Is it about to happen?

There has been one story driving the tech stocks higher. Especially the “Magnificent 7” stocks which includes Nvidia.

That story is centered around “AI.”

The AI boom is all anybody is talking about in the market and that story has been the lead headline for several years now.

Suddenly, the storyline isn’t so exciting.

“Mag7 names are all plunging premarket by 4-6% while some former leaders are getting absolutely nuked such as NVDA -11%, AVGO -10.8%, VRT -18%. The global risk off panic means bond yields are collapsing while the USD is moving lower and commodities are mixed. Mag7 earnings take on heightened importance this week, but the SPX may be down 4-5% ahead of TSLA’s earnings on Wed.”

Why are they selling off so hard?

In case you missed this huge story that isn’t getting reported much in the MSM.

The big sell off in tech stocks that is driving the entire market down is being caused by one thing.

DeepSeek

“There is only one topic on traders’ minds this morning that threatens to upend the multi-year AI bull trend driving chip stocks to record highs: the (extremely) cheaper Chinese DeepSeek response to OpenAI’s ChatGPT, as noted in an overnight piece titled “Goldman Asks If China’s DeepSeek is AI’s Sputnik Moment.”

Bloomberg’s Mark Cudmore said earlier that the emergence of DeepSeek is terrific news for global growth and productivity. However, he cautioned that the new free, open-source large-language model undermines the massive premium paid for AI research and development by US mega-cap stocks, warning that this development could serve as a catalyst to end 15 years of US stock market exceptionalism.

Perhaps the pin that bursts the AI stock bubble in the US. If so, watch out below…”

DeepSeek is not only comparable to ChatGPT, it’s free and has an open source large language model.

Open source competition from China.

Who would have thought?

Competition has always been a good thing for consumers.

Not so good for big corporations who want to have a monopoly.

“The buzz over DeepSeek has stoked questions about the tens of billions of money big tech firms have spent on AI models and data centers, along with broader trends to upgrade aging power grids.

As a result, chip designer Nvidia plunged 12% in premarket trading in New York, while Netherlands-based chip companies ASML and ASM International tumbled 10% and 15%, respectively. In Asia, Japanese chip-related stocks traded lower.”

DeepSeek isn’t just comparable, it’s cheaper because it is much cheaper to develop.

“How does DeepSeek R1 compare to OpenAI or Meta AI?

Though not fully detailed by the company, the cost of training and developing DeepSeek’s models appears to be only a fraction of what’s required for OpenAI or Meta Platforms Inc.’s best products. The much better efficiency of the model puts into question the need for vast expenditures of capital to acquire the latest and most powerful AI accelerators from the likes of Nvidia Corp.”

While all these sanctions on China, tried to prevent them from gaining a foothold in the AI industry, they have found a way to do it much cheaper and more efficient.

This will force big corporations like Nvidia to compete.

They weren’t expecting this type of competition at all.

Will DeepSeek be the pin that pops the market bubble?

We shall see.

===@CMDRVALTHOR

EIR Reference: