OMG! Did You Know… The Stock Market Is In Chaos Right Now Over The New Chinese AI Player in Town “DeepSeek”?

So if you like to keep up to date with the finance sector and dabble in a bit investing, you probably would have seen by now that there were some major shifts in the global stock market today!

There’s so much info being thrown around about what exactly is going on and I know how confusing, gossip-y and unreliable *cough Twitter (sorry but I will never see it as X) social media can be – so I thought after doing a little bit of research (as I was seeing is the dreaded red in my own portfolio) I would break down what’s actually going on and how it may affect your investments in both the short and long term!

So What happened exactly? (The Tea )

Today (Monday, January 27, 2025) the global stock markets (the tech sector specifically) experienced significant declines. This downturn was mainly driven by the emergence and popularity of new AI startup DeepSeek, a Chinese artificial intelligence (AI) startup that soared in popularity since the beginning of the year. I mean, DeepSeek’s AI assistant app has become THE top download on the US Apple App Store, even surpassing major competitors like Open AI’s CHAT-GPT in online search engines. This insane news has rocked the big players in tech and as a result has negatively impacted the stock prices of leading AI giants like Nvidia, Qualcomm, IBM and Intel (RIP to my Trading 212 Tech Pie ).

So this new kid on the block, DeepSeek really packs a punch and for the fraction of the both for consumers and developers – and as a result has the big tech bro’s shaking in their Trump “Meme Coin” boots. DeepSeek’s recently launched an advanced open-source reasoning model, throwing its fits up and challenging the dominance of “Western-led” AI companies. The company’s AI model named, R1, has demonstrated capabilities on par with some of OpenAI’s leading models like CHAT-GPT.

Employing “pure reinforcement learning,” DeepSeek’s software shows major similarities to Google DeepMind’s AlphaZero, with the DeepSeek R1 model achieving advanced performance in math, code, and reasoning without supervised data. Basically… its smart AF and all the other tech companies trying to screw us over with high prices to use their softwares are out of luck and boohoo their time is up! But not seriously… DeepMind’s fully open-sourced approach under an MIT license contrasts with U.S. companies that offer proprietary AI technologies, meaning this development could majorly disrupt pricing models (a.k.a they will be forced to lower their greedy and insane prices), such as OpenAI’s $200/month ChatGPT Pro plan, by offering similar capabilities for free. 

The rise of DeepSeek has led to a MAJOR GLOBAL SELL-OFF AI-linked stocks. Nvidia’s shares fell 17.4%, contributing to a 3.5% decline in the Nasdaq Composite. Other major tech companies, including Microsoft, Meta, and Tesla, also faced notable downturns. Analysts remain cautious about the potential long-term impact of DeepSeek’s technology on the AI industry.

So what does this mean for well… everyone?! And is your money safe?

Despite the downturn, some experts advise against overreacting, suggesting that potential corrections or new investment opportunities may arise. Major tech firms are set to report their earnings soon, which could further influence market trends and get them back on track. So don’t go crazy thinking you need to get rid of all of your AI stock although for some people with large money invested it’s tempting. Remember to keep that long term vision! (That’s not financial advice btw and dont blame me if this was wrong advice, either way at least we can be broke together )

But on a serious note, overall this situation really highlights the risks of a concentrated stock market, where the largest 10 stocks represent almost 40% of the S&P 500. While concentrated markets can yield high returns from dominant companies like Apple and Amazon, historical data suggests that such companies often underperform over longer periods in many cases.

FYI – If you dont wan’t to get into all the tech-y predictions and stuff you can skip this section!

Investing in the top 10 stocks has always been a trusted strategy for those seeking stability and long-term growth with their finances as these companies such as Apple, Microsoft and Google (Alphabet Inc.), often represent the most innovative and dominant sectors of the economy. These market leaders tend to boast strong financial fundamentals, established competitive advantages, and a proven track record of delivering consistent returns over time thus making them a cornerstone of many financial portfolios and appealing to both individual and institutional investors. They are well established, resilient businesses that are well-positioned to weather economic uncertainty while still participating in broader market growth.

However, on the flip side, recent findings from Bridgewater Associates (American investment management firm), indicates that over a subsequent decade or two, about half of the market champions will underperform the market and fall out of the “top 15 champions group”. And over longer periods of time, almost all “champions” will be “dethroned” (Eshh!). The shift towards equally weighted index products (over ??) is being explored as a method to mitigate risks associated with market concentration by providing diversification. As currently, a small number of companies (like the top 10 stocks in the S&P 500) dominate the market, often representing a significant portion of the total index (e.g., 40% or more). This equal-weighted approach however challenges the efficiency of the stock market as claimed by age-old current styles passive investing and how the stock market and investing has always worked.

Goldman Sachs also seems to back up Bridgewater’s sentiment by predicting that if current concentration trends continue, the S&P 500 might only return 3% annually over the next decade, compared to a hypothetical 7% with no change in concentration. Therefore, the debate between continued market concentration and a potential shift towards equal-weighted indices remains crucial for investors seeking long-term returns. 

So what are the US and “western AI/tech companies going to do about DeepSeek?!”

Maybe the hack them via a cyber attack to slow them down and try to prevent them from taking any more of their customers? LOL (sound like a joke but seriously they’ve already had to halt new registrations/sign up’s due to a “Cyber Attack” apparently) which sounds very convenient considering the drama doesn’t it?

Well recently U.S. President Donald Trump announced a $500 billion private-sector investment plan in AI infrastructure last week. This initiative aims to bolster the U.S. position in the global AI race. Meanwhile, China’s ByteDance and Samsung are also making notable advancements in the AI sector and getting more of their skin in the game. As key players like Apple, Microsoft, and Meta prepare to report quarterly results, competitors are REALLY catching up and it isn’t looking good. Time to pull your socks up and work HARD not SMART now boys.

So #QuestionForTHECommunity…

If You Invest in the Stock Market What Are You Planning to do?

Well for me, firstly I’m going to straight to download DeepSeek ASAP (bye bye Chat GPT lol). But no seriously, even as a newbie to investing in the stock market, I’m keeping my cool and riding the wave. But for those majorly in the red both in Stocks & Crypto what’s your strategy going forward if this does indeed shake things up on a more long-term basis and begin the change in the status quo of the global US tech hold and the US no longer being the main ones at the head of the table?

I want to hear what your plan is so: tweet or bluesky me or find me wherever you’re at. Let’s strategise so we can all try and not lose out and ride the wave together!

xo

Sources:

Reuters (2025) https://www.reuters.com/markets/us/global-markets-view-usa-2025-01-27

Business Insider (2025)https://www.businessinsider.com/china-startup-deepseek-openai-america-ai-2025

CNBC (2025) https://www.cnbc.com/2025/01/27/nvidia-falls-10percent-in-premarket-trading-as-chinas-deepseek-triggers-global-tech-sell-off.html

Bridgewater Associates (2024) https://www.bridgewater.com/research-and-insights/the-life-cycle-of-market-champions

The Market Watch (2024) https://www.marketwatch.com/story/wall-street-is-worried-stocks-might-be-on-the-cusp-of-a-lost-decade-1b3e2512?

Barron’s (Goldman Sachs) (2024) https://www.barrons.com/articles/goldman-sachs-stock-market-lost-decade-9c9fd595?

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Legal Disclaimer:

The information provided in this post is for educational and informational purposes only and should not be considered financial advice. I am not a financial advisor, and you should not rely on this content to make financial decisions. Always do your own research and consult with a qualified financial professional before making any investment or financial choices!