To The Moon

We saw the big tech stocks which are mainly semiconductor-related names and utility shares with AI exposure suffered significant declines. This is due to the investors sentiment shifting after the release of DeepSeek’s AI model.

This has caused the stock market to show a mixed performance, in contrast, we are seeing funds being rotated into other market sectors.

DeepSeek's AI model has also raised questions about the future of data center demand, as it challenges the notion that AI will drive massive investments in data centers. This has led to declines in data center REIT stocks like Digital Realty Trust (DLR, Financial) and Equinix (EQIX, Financial), as investors reassess the growth prospects for these facilities.

Investor caution was evident ahead of a busy earnings week, with approximately 40% of the S&P 500 by market capitalization set to report earnings. Among the notable companies are Apple (AAPL) and Microsoft (MSFT), two of the three $3 trillion companies.

The Dow Jones Industrial Average increased by 0.7%, with 20 out of 30 components advancing. - The equal-weighted S&P 500 recorded a modest gain of 0.1%, contrasting with the 1.5% drop in the market-cap weighted index. - NYSE market breadth was positive, with advancing issues leading decliners by a 3-to-2 ratio. However, on the Nasdaq, decliners outpaced advancers by the same margin.

DeepSeek Challenge Saw Significant Tech Movement

$NVIDIA(NVDA)$ lost 16.97% which mark its largest single-day loss in market capitalization, the decline was attributed to concerns over China's DeepSeek AI model, which is perceived as a cost-effective alternative to U.S. options like OpenAI's ChatGPT.

The potential of DeepSeek to challenge leading U.S. AI players has raised questions about the future of the sector. Microsoft (MSFT) also lost modestly at 2.14%, whereas we saw Apple (AAPL) gained 3.18%.

I am glad that my Nvidia still managed to hold its price well.

Growth Seen In December New Home Sales Data

We saw there is growth in new home sales, although higher selling prices may pose challenges moving forward, after the December New Home Sales reached 698K, beating the consensus of 680K while the previous was revised to 674K from 664K.

We will be expecting some economic data today, December Durable Orders and Durable Orders ex-transport at 8:30 ET, 9:00 ET, we will be expecting November FHFA Housing Price Index, November S&P Case-Shiller Home Price Index.

Finally at 10:00 ET, we will be getting the January Consumer Confidence which consensus stands at108.1 with the previous recorded at 104.7.

S&P 500 Technology Sector Biggest Loser With 5.58% Decline

The PHLX Semiconductor Index (SOX) fell by 9.2% as investors reconsidered capital spending. There are more S&P 500 sectors ended higher, with six ending in the positive between 0.07% to 2.85%. The other five ending lower with range from -5.58% to -0.74%, Information Technology is the biggest loser.

Note Yield Also Decreased

The 10-year Treasury yield decreased by ten basis points to 4.53%. The 2-year Treasury yield dropped by eight basis points to 4.19%. The $69 billion 2-year note sale saw tepid demand, while a $70 billion 5-year note offering attracted stronger interest.

Stocks To Watch

The release of China's DeepSeek's open-source AI model, DeepSeek-R1, has sent shockwaves through the tech sector, leading to a significant sell-off. Nvidia (NVDA) shares tumbled nearly 17%, wiping out $589 billion in market cap, as investors worried about reduced AI-related spending. Despite the sell-off, Nvidia emphasized that creating such models still requires a substantial number of GPUs, highlighting the ongoing demand for their products.

Intel's (INTC) former CEO, Pat Gelsinger, criticized the market's reaction to DeepSeek's model, suggesting that the lower-cost approach could actually expand the AI market. Gelsinger noted that the affordability of DeepSeek's model challenges the existing high-cost paradigm in AI development, potentially leading to broader deployment of AI technologies.

$Apple(AAPL)$ managed to rise nearly 1.5% despite the tech sector's downturn, as it has not heavily invested in AI, relying instead on partners like OpenAI. This strategy appears to have shielded Apple from the immediate impacts of DeepSeek's disruptive entry into the AI space.

Looks like Apple strategy have worked well in this kind of scenarios, and we need to look beyond their devices sales as this could mean Apple revenue taking should be changing.

If we were to look at how AAPL have been trading over the past two weeks, the bulls are trying to create a daily uptrend expansion but did not succeed but we are seeing a crossover of the 12-EMA and 26-EMA, this could mean that there might be a nice gap up coming from Apple.

If that happen, we could be seeing AAPL making a new upside movement, if we looked at the RSI, we could also monitor and see if it could reach the oversold, then this might be a good time to get into AAPL.

Semiconductor stocks were among the hardest hit, with Broadcom (AVGO) falling about 19%, and Advanced Micro Devices (AMD, Financial) and Qualcomm (QCOM) also experiencing significant declines. The sell-off reflects concerns over competition from DeepSeek's cost-effective AI model, which could alter the landscape for AI hardware demand.

Estée Lauder Companies (EL) is reportedly considering selling some of its brands as part of a strategic review. The cosmetics giant is evaluating its portfolio amid a leadership transition and increased competition from rivals like L’Oréal SA. Estée Lauder's shares gained 1.8% in late trading, partially recovering from a significant 52-week loss.

Summary

I think market would continue to comprehend the impact and benefit that DeepSeek bring, one thing I am concerned as they reported that they are pausing registration due to suspected cyber attack. For an AI model which is offering API, I think the security part need to be enhanced.

So wonder whether is this because of lower spending on security leading to this suspected cyber attack, I have tried the DeepSeek via the web, it is slow in response, though answer given is more comprehensive.

But imagine putting this into your app, that would be an issue to the consumers, I will be building an app using their API and see how it goes.

Market should continue to experience some weakness in the tech sector, but there are some winners though. One of them is $Amazon.com(AMZN)$ which gained 0.24%, and I have a long-term position on it.

Looks like hyperscalers would be benefitting as if DeepSeek need to expand to other regions their services need to be hosted near the consumer regions which Amazon have multi-regions data centre.

Appreciate if you could share your thoughts in the comment section whether you think market would still experience some selloff but some tech stocks would gained from it too?.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.