DeepSeek Now Takes a Back Seat to the Fed and Big Tech Earnings
While there has been little talk about the Fed rate decision amid other drama, Powell still has the potential to shake up the market Wednesday.
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The stock market narrative about the DeepSeek AI program underwent a metamorphosis on Tuesday, which helped to calm some worries and fears. On Monday, there was concern that the clever Chinese project, developed at a fraction of the cost of U.S. AI projects, would prove that billions spent in the U.S. were wasted.
After further analysis, however, it appears that the project may not have been done as cheaply as believed, and AI leaders in the U.S. started to say that they welcomed the competition. The White House AI and crypto czar stated that U.S. AI companies may have become a little too complacent, but now they are on notice.
The AI stocks steadily improved all day, and after a slow start, the rest of the market followed. At the closing bell, overall breadth was positive, with around 5,160 gainers and 4,370 decliners. There were only 275 new 12-month highs, but the price action was better, although the Russell 2000 IWM lagged with a gain of just 0.12%. The Magnificent Seven MAGS regained 3% and nearly filled the gap on the chart from Monday morning.
The key is that the market is finding a way to spin DeepSeek as a positive rather than a disaster for the AI industry. A number of software stocks such as Salesforce CRM and Snowflake SNOW jumped sharply because cheaper AI is viewed as a positive for those who are using the data rather than trying to create large language models.
The big question now is whether earnings reports will further calm the worries about DeepSeek. It is a topic that is sure to be addressed by all the big technology companies — and it is likely that they have already developed strategies for dealing with it.
In addition to earnings, we have the Fed interest rate decision Wednesday at 2 p.m. ET. There has been very little talk about it because of all the Trump and DeepSeek drama, but it still has the potential to shake up the market if Jerome Powell says the wrong things.
Overall, I remain positive about stock picking and am looking forward to increased volatility as earnings reports hit.
At the time of publication, Rev Shark was long SNOW.
