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The release of a new artificial intelligence model from China’s DeepSeek could mean a rough period will follow for Nasdaq stocks. The Chinese AI company has yet to announce a release date, but it’s expected to be imminent following last week’s conclusion of the Lunar New Year celebration. The startup has announced previous models early in the calendar year, most memorably in January 2025 — when the launch of the open-source reasoning model shocked the stock market with its high performance and low cost. On Jan. 27, 2025, the Nasdaq Composite tumbled 3% , while Nvidia lost nearly 17%. The launch of DeepSeek V4 could throw another wrench in the stock market. Last year, the startup alarmed investors when it said it only took two months , and not even $6 million, to build the model using lower-capacity Nvidia chips. That called into question the U.S.’ lead in AI, as well as Big Tech’s massive spending in datacenters. Even so, JPMorgan’s trading desk said it’s holding on to a tactically bullish view, adding that megacap tech could make a comeback and broader anxiety in AI could may start to dissipate. However, the bear case includes the possibility that Nvidia misses its earnings results, and that the stock market gets a DeepSeek Part Two moment. Here’s how the S & P 500, Nasdaq and various chip-related ETFs responded after last year’s DeepSeek release. Semiconductor stocks were especially hurt by the launch. On Jan. 27, 2025, the VanEck Semiconductor ETF (SMH) tumbled nearly 10%, and failed to recoup those gains one week to one month following the release. Software stocks as represented by the iShares Expanded Tech-Software Sector ETF (IGV) was not impacted to the same degree, but still underperformed the S & P 500. On Jan. 27, the ETF fell 1.7%, while the broader index was lower by 1.5%. As it is, the stock market is already in a fragile spot. Aside from DeepSeek, traders are weighing President Donald Trump’s latest changes over the weekend to his tariff agenda, and anticipating the possibility of a U.S. attack on Iran. Nvidia’s results later this week is also a key uncertainty for investors. Stocks sold off Monday, with the Dow Jones Industrial Average tumbling more than 700 points, or 1.5%. The S & P 500 fell 1%, while the Nasdaq Composite slid 1.1%.
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