Imagine the entire Brazilian stock market going up in smoke! That’s how much Nvidia lost in a single day — $600 billion — after an obscure Chinese startup showed that AI can be done cheap.
So does this mean that Nvidia is the AI bargain of the century now? Well… not so fast.
Big names like Christopher Wood, Jefferies’ global head of equity strategy, are warning that DeepSeek’s explosive arrival could spook the entire AI hardware ecosystem. Big players like Meta might rethink their spending spree, and the ripple effect could hit the supply chain hard.
Here’s how the money trickles down in AI atm:
- Big Tech (Microsoft, Meta, Google, Amazon) forks over cash to go all-in on AI.
- Nvidia, Broadcom & co. rake in chip orders to fuel that ambition.
- TSMC churns out the chips for Nvidia and AMD.
- ASML makes the machines so TSMC can keep up with demand.
If Big Tech pulls back, the impact hits Nvidia first (down 17%), ➡️ TSMC next (-13%), ➡️ then ASML (-6%).
And the power guys like Vistra and Constellation Energy that have been on a dream run? They take a hit too.
Buy the dip, or hold off?
The DeepSeek story “is shaking investor confidence in the entire ecosystem,” writes Peter Bartlett at Goldman Sachs’ trading desk. That’s because “the alleged low cost of the DeepSeek model” calls into question the huge sums that have been pulled into AI investment so far.
Another factor in the burning Nvidia buy-the-dip question: it’s a super risky stock. Consider this: Nvidia is responsible for eight of the 10 biggest single-day market cap losses in the history of stock markets, according to Bloomberg data, and all of that came in the past year alone.
Read more: China’s DeepSeek just dented America’s AI ego — and maybe its lead
Tech’s big spending habit
Remember when a Big Tech firm announcing more AI spending typically meant Nvidia stocks rallied, and the market rewarded the spender too? (“Great job, you’re making moves to compete with ChatGPT!”)
Well, that’s all been turned on its head. What used to be read as a positive will now probably be seen as bad news, all thanks to China showing (again) it can do it cheaper.
Talk about bad timing. The DeepSeek drama has arrived in the biggest week of earnings season.
Will tech giants now revise their spending habits, or is it too late to rewrite that quarterly earnings announcement?
That’s especially worth noting now as Microsoft, Meta and Apple did relatively well during Monday’s mess. Microsoft fell just 2%, while the other two rose in value.
When it comes to cutting $$$ from big programs, this won’t be Meta’s first rodeo. We’ve seen similar drastic turnarounds with Metaverse cost-cutting and the rolling back of content moderation.
Read more: DeepSeek shocker erases over $1 trillion from Big Tech
So who’s winning?
Jefferies’ Wood said the broker’s “GREED & fear” portfolio will cut exposure to AI “picks and shovels” plays across various portfolios because of the “potentially dramatic implications of the DeepSeek news.” ASML and Hynix holdings in the global long-only stock portfolio will be removed, while investments in Nvidia and TSMC will be reduced.
What are they buying in tech? Alibaba.
Yardeni Research offers another play: the S&P 493. The rest of the companies outside the Magnificent 7 cohort within the S&P 500 held up quite well amid the mayhem on Monday, and Yardeni says they’ll likely benefit from cheaper AI, even if expected profit margins fall within the Mag 7 group.
The Defiance Large Cap ex-Mag 7 ETF ($XMAG) is up 4.4% since the start of 2025, double the S&P 500’s 2.2% over the same period.
So it’s probably wise to ease off on Mag 7 for the time being. If you’re trying to cash in on the new game in AI town, Chinese tech names could be a smart play instead. Take a look here.
Edited by Thyagu Adinarayan and Tim Hume. If you have any tips, ideas or feedback, please get in touch: talk-to-us@moniify.com
