Tech

“Wake-up call” for US Investors After DeepSeek’s Rise to Fame 

  • Reading time: 2 min
The ascent of DeepSeek, has triggered a $1 trillion sell-off in US tech stocks, as global investors reconsider their portfolios

The sudden ascent of DeepSeek, developed for just 5.6 million, has triggered a $1 trillion sell-off in US tech stocks, as global investors reconsider their portfolios and question the sustainability of AI infrastructure and its valuation. 

President Trump called the rise of DeepSeek’s AI model a wake-up call for the US, reflecting on reactions and concerns among investors in American infrastructure for AI service. With major stakes in giant companies like Nvidia, Microsoft, and Apple, investors are now questioning the future of the sector, assessing China’s more cost-efficient AI innovations. 

AI Boom Slowing Down? 

Some analysts are still positive, Tony Hallside, chief executive of Dubai-based STP Partners, said the rise of DeepSeek demonstrates market’s maturity to allow AI in infrastructure services innovation without requiring colossal funding. 

“AI innovation can now be less and less expensive,” Hallside said, adding that “it opens new opportunities for investors beyond US players such as Nvidia.” 

Andreas Hasellof, chief executive of Ombori Consultancy, also believes cheaper AI infrastructure models will continue to provide a greater force for broader industry adoption in areas like health and logistics.  

Hasellof notes that US tech stocks are highly concentrated and ready for market correction.  

“Such concentration usually levels out,” he says, hinting that investors should look elsewhere for diversification. 

Beyond US Tech Stocks 

This recent sell-off has pushed many investors to search for diversification. The US markets now see the time for correction, according to Mathieu Racheter, chief equity strategist at Julius Baer, who advises portfolio shifts to either cyclicals-Industrials and Financials-or to mid-cap stocks. 

Laith Khalaf, head of investment analysis at AJ Bell, says many passive Exchange-traded funds (ETFs) have an extremely heavy exposure to the top US tech stocks. 

“A typical ETF tracking the S&P 500 invests around a third of its portfolio in just seven companies,” he says. Khalaf recommends that investors looking for generative AI infrastructure services, diversify into regions like Europe, Japan, or emerging markets. 

Simplifying AI Software Infrastructure 

Century Financial’s Chief Investment Officer, Vijay Valecha, said that AI was slowly moving away from being a hardware-based industry and more toward software. This should reduce the high-cost computing requirements, he added, which will make DeepSeek a more feasible option. 

Valecha also mentions that EFTs give exposure to non-tech sectors, like the iShares Russell 2000 ETF as a small-cap fund or the iShares MSCI China ETF since the country will increasingly benefit from AI infrastructure. 

Final Thoughts 

Despite the anxiety DeepSeek is causing, it doesn’t signal the end of US tech dominance. However, it points out that a more competitive AI landscape is in the making. 

As long as global key players like China and the UAE increase investments in AI infrastructure and operations fundamentals, US investors should also broaden their portfolios to attract more growth in this rapidly evolving sector.  

Inside Telecom provides you with an extensive list of content covering all aspects of the tech industry. Keep an eye on our Tech sections to stay informed and up-to-date with our daily articles.

Tags: