The introduction of DeepSeek, an innovative 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 high performance with reduced computing power challenges the demand for premium processing resources, potentially compressing revenue margins for major US tech companies. This development has sparked concerns about the sustainability of current valuations, particularly in sectors heavily reliant on AI-driven growth narratives. As the market adjusts to these technological disruptions, the potential for increased volatility looms, especially given the high "hopes and dreams" ratios that have been supporting elevated equity valuations.
The Invesco S&P 500 Equal Weight ETF (RSP) experienced a slight decline, dropping 0.09% to $182.03 at 10:00 AM on Monday, January 27.