The emergence of DeepSeek, an open-source AI tool from China, is prompting a reevaluation of AI-driven valuations, impacting the broader tech sector. DeepSeek's ability to deliver high performance with reduced computing power challenges the demand for high-end processing resources, potentially compressing revenue margins for major US tech companies. This development has led to a cautious reassessment of inflated valuations driven by AI optimism, as investors consider the implications for future growth and profitability in the tech sector. The S&P 500 Index, heavily influenced by tech stocks, reflects this sentiment as it adjusts to the potential market correction triggered by technological disruptions.
The iShares Core S&P 500 ETF (IVV) experienced a decline, dropping 1.54% to $601.48 at 10:00 AM on Monday, January 27.