The emergence of DeepSeek, an open-source AI tool from China, is prompting a reevaluation of the AI industry's growth prospects, impacting market sentiment. 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 inflated valuations driven by AI optimism, particularly in sectors like information technology and manufacturing. The S&P 500 Index's decline reflects this cautious reassessment, as market participants weigh the implications of technological disruptions on future growth and profitability.
The SPDR S&P 500 ETF (SPY) experienced a decline, dropping 1.54% to $598.62 at 10:00 AM on Monday, January 27.