The introduction of DeepSeek, a cost-effective AI solution, is generating optimism in the tech sector by promising to reduce operational expenses for major companies like Microsoft, Meta, and Alphabet. This development is seen as a "positive supply shock," potentially enhancing productivity and efficiency across industries, which could lead to a disinflationary effect by lowering production costs and consumer prices. However, the broader market is also contending with geopolitical uncertainties, such as potential US restrictions on Chinese tech, including DeepSeek, which could impact the long-term outlook for the global tech sector. Despite these concerns, the immediate market reaction reflects a cautious optimism as investors assess the potential benefits of DeepSeek against these risks.
The ProShares Short S&P500 ETF (SH) has risen 1.71% to $41.72 as of 14:20 on Monday, January 27.