Does DeepSeek really put overseas tech stocks in trouble, or is this just a temporary decline?

With the shocking arrival of super AI DeepSeek, global computing power is impacted, and overseas AI stocks are "shaking," subsequently declining. Data shows that due to panic over AI valuations, Nasdaq 100 index futures once fell nearly 5%, Broadcom dropped over 12%, and NVIDIA fell nearly 11%, as the market seems to be in trouble...

Currently, analysts' attitudes are divided; some believe that DeepSeek has indeed put overseas tech stocks in a difficult position, while others think this is just a temporary decline:

The Rise of DeepSeek May Trigger Market Turmoil

DeepSeek R1, as a "PhD-level" AI application, has rapidly risen in the API market at a price of $2.19 per million tokens, in stark contrast to OpenAI's $60 price.

Currently, DeepSeek ranks third among the top free applications in the iTunes store, while users are celebrating, it has also raised concerns in the market about its potential impact.

Some analysts worry that DeepSeek's low-price strategy may disrupt the existing AI market landscape and could impact the performance of large U.S. tech stocks.

Especially in the past three years, the seven giants of U.S. stocks contributed about 60% to the S&P 500 index's 29% increase, with chip giant NVIDIA contributing over 25%, nearly half of the seven giants' earnings.

But now NVIDIA seems to be facing significant risks, with analysts pointing out that from a technical perspective, NVIDIA is forming a "third-stage" top pattern (usually indicating that after a period of price increase, signs of a peak appear, and it may enter a downward trend):

Currently, NVIDIA's stock price has risen about 15 times from its 2022 low; and it has not seen earnings since June 2024, with sellers also rejecting the June 2024 peak.

In addition, the market is also concerned that the rise of DeepSeek may trigger a burst of the tech bubble in U.S. stocks. Historical data shows that the recent trend of the Nasdaq index (NDX) is similar to that during the 2000 tech bubble, when the bubble burst due to excessive construction of fiber optic capacity, and when sales slightly declined, market expectations were generally adjusted downward.

Now, the market fears that there may also be excessive construction of GPU and data center capacity. This also means that once one company’s performance falls short of expectations, it could trigger a chain reaction in the market.

In addition, the total exposure of hedge funds has significantly increased in the past few days, reaching a five-year high.

The rise of DeepSeek may just be a temporary fluctuation

However, not all analysts are pessimistic about DeepSeek's market impact. Some market participants believe that the rise of DeepSeek may just be a temporary fluctuation in the market rather than a long-term dilemma.

Analysts argue that, first, Apple's stock price has shown signs of being oversold. Data shows that Apple's 14-day Relative Strength Index (RSI) against the Nasdaq index is about 20, close to the maximum oversold level in the past five years (excluding the first quarter of 2024).

Secondly, the market positioning of the seven tech giants and investor sentiment also show favorable signs. Currently, the net allocation of the seven giants accounts for 15.1% of the total net exposure in the U.S., significantly down from the record high of about 21% in June 2024, marking the lowest level since May 2023, with a total long/short ratio of 3.09, ranking in the fifth percentile over the past year.

Additionally, some analysts point out that as the capital markets absorb all this information and reprice the value of the seven giants, the stock market will experience fluctuations, with Tesla having the least risk and Nvidia having the most risk. However, if companies like Meta, Microsoft, and Google can succeed with lower capital expenditures (without needing to spend $50 billion to $80 billion each year), they will win favor in the market.