WallStreet Prepares for Fed Decision Following Big Tech Trio’s Earnings
On January 31 Wall Street remained tense as the Federal Reserve’s rate decision coincided with US tech stock earnings reports from Meta, Microsoft, and Tesla, AI-heavyweight investors.
Already struggling to justify their colossal AI investments, US tech giants got another wild card, DeepSeek, a Chinese AI company disrupting industry economics. Whereas US companies have invested billions in AI, DeepSeek’s advances point to a cheaper alternative.
As US tech companies stock market reacts, analysts are cross-examining whether DeepSeek’s quick rise to fame will alter investment plans in AI in the long term.
DeepSeek Bursting Wall Street’s Bubble
DeepSeek has burst onto the scene in recent times and frustrated such assumptions about how much it costs to develop AI technologies, as US stock market tech companies pour billions into AI development.
“While any fundamental impact of DeepSeek’s splashy and shocking entry in the AI race may not be felt in the immediate results, it will inevitably be the topic du jour in management’s discussions,” said Bloomberg Intelligence analysts Michael Casper and Gina Martin Adams.
US tech stock investors like Microsoft and Meta are on edge, with both US tech companies stock value, have the largest bets placed on AI in hopes of it driving future growth, saw $500 billion slice off Nvidia’s market value in a single week.
US Tech Stock Prepare for Market Shifts
In the past year alone, the Magnificent Seven, including Microsoft, Alphabet, Amazon, Apple, and Nvidia, added more than $5 trillion in market value, accounting for more than half of the S&P 500’s 24% rise.
Now, the US’ AI dominance is threatened by China. While Meta’s tech stocks in US continued their inexorable rise, with AI-driven optimism about profits, Tesla and Microsoft have had a more checkered performance. Tesla’s stock is almost double its level when it last reported earnings, largely reflecting the increasing political pull of chief executive Elon Musk, though its AI efforts focus more on autonomous driving rather than generative AI like DeepSeek’s.
“Between Microsoft, Meta, and Tesla, you’ll get some real perspective about the AI outlook and how much of a revelation DeepSeek has created,” said Michael O’Rourke, chief market strategist at JonesTrading. “What type of threat is that to the massive investment that has gone into the AI space?”
US stock market tech companies underperformed on Wednesday afternoon as the Federal Reserve kept interest rates unchanged, Tesla was off 3%, Microsoft lost 1%, and Meta was flat. According to analysts, when AI investment isn’t translating into stronger profits, sooner rather than later, the large-cap t US market tech stocks can undergo a longer period of decline ranging from 10% to 20%.
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