The introduction of DeepSeek, a cost-effective AI solution, is generating optimism by promising to reduce operational expenses for major tech companies, potentially boosting profitability and stock valuations. This development is seen as a "positive supply shock," enhancing productivity and efficiency across industries, which could lead to a disinflationary effect by lowering production costs and consumer prices. However, geopolitical uncertainties, such as potential US restrictions on Chinese tech, including DeepSeek, are creating a clouded long-term outlook for the global tech sector. Investors are weighing these potential benefits against ongoing geopolitical risks, contributing to the current market dynamics.
The SPDR Portfolio S&P 500 ETF (SPLG) experienced a decline, dropping 1.65% to $70.33 at 14:20 on Monday, January 27.