DeepSeek Triggers AI SelloffDeepSeekTriggersAISelloff

The launch of AI chatbot DeepSeek sent a shockwave through equity markets to begin the week. The Chinese company surprised investors and Silicon Valley by revealing AI models that were said to require fewer and less-advanced chips, providing substantial cost savings. Shares in chipmakers fell sharply on Monday, headlined by Nvidia sliding 17% to lose about $593 billion in market value. The market selloff spread to utilities, whose share prices have benefited from an expected surge in power usage by data centers. Natural gas futures also retreated on the prospect of weaker demand.

Tech stocks recouped some of their losses on the heels of Monday’s rout. New engineering prowess, if replicated by other companies, could lead to an overall increase in demand for AI services, creating additional productivity gains across the economy. Industry experts also debated whether DeepSeek’s apparent breakthrough was as significant as it first seemed. In economic news, the Federal Reserve elected to leave interest rates unchanged at its first meeting of the year on Wednesday. During a press conference, Chair Jay Powell said the Fed does not “need to be in a hurry” to adjust its policy stance. Inflation has remained sticky, while the US economy grew 2.3% at an annualized rate in the fourth quarter, according to an initial estimate on Thursday.

As part of PGIM’s 2025 Best Ideas report, Jennison Associates explores how AI-driven change is becoming evident in the tech sector and global economy, giving rise to long-term investment opportunities.