The introduction of DeepSeek, a new AI tool from China, is prompting a reevaluation of the AI industry's growth prospects and its impact on tech valuations. DeepSeek's ability to deliver performance comparable to leading AI models with less computing power is challenging the demand for high-end processing resources, potentially compressing revenue margins for major US tech companies. This development is causing investors to reassess the inflated valuations driven by AI optimism, particularly in sectors like information technology and manufacturing. The market's cautious response reflects concerns about the sustainability of current valuations and the potential for increased volatility as expectations adjust.
The Vanguard S&P 500 ETF (VOO) experienced a decline, falling 1.54% to $550.42 at 10:00 AM on Monday, January 27.