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DeepSeek, the Chinese AI Startup, Roils Markets; Trump Holds Colombia Tariffs

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January 27, 2025

TLDR: DeepSeek disrupts stock markets with tech valuation questions; Trump suspends Colombia tariffs after migrant deal, increases deportation efforts targeting Chicago.

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In this episode of the podcast, the hosts discussed major developments affecting the financial markets, focusing on the emergence of DeepSeek, a Chinese AI startup challenging US tech valuations, and recent political decisions surrounding tariffs and immigration.

Key Discussion Points

1. DeepSeek's Impact on US Tech Companies

DeepSeek has recently shaken up the stock market as it presents a cost-effective AI model that operates efficiently on less advanced technology. This has raised critical questions about the inflated valuations of major US tech companies, including Nvidia, Meta, and Microsoft.

Insights from Experts:

  • Mark Kudmore, a Bloomberg Markets reporter, highlighted that DeepSeek’s advancements disrupt the narrative of U.S. tech exceptionalism that has lasted over a decade.
  • Kyle Rata, a senior market analyst, noted that this situation has investors buzzing with uncertainty about US tech dominance, leading to a significant sell-off in tech stocks:
    • Nvidia shares fell 10%
    • ASML decreased by 11%
    • Other tech giants like Meta and Microsoft dropped more than 4%

2. Market Reaction

The podcast noted the market's volatile reaction to the DeepSeek news, coinciding with a potential slowdown in profit growth for the major tech companies involved in AI. Analysts predict that profit growth for these companies in the upcoming fourth quarter will be the slowest it's been in nearly two years, prompting concerns over potential over-investment in AI and technology.

3. Upcoming Earnings Reports

There are heightened expectations as a series of earnings reports from the “Magnificent Seven” companies loom, including tech behemoths like Microsoft and Apple. The anticipated responses from these reports will significantly influence market sentiment.

4. Political Landscape: Tariffs on Colombia

The episode also covered a significant geopolitical development regarding tariffs on Colombia, initiated and quickly reversed by President Trump following a deal on migrant returns. The implications of trade policies on markets are profound:

  • Goldman Sachs highlighted that while the tariffs were suspended, the risk remains, indicating that the use of tariffs will likely continue to influence economic dynamics for the foreseeable future.

Important Takeaways:

  • The threat of tariffs, particularly as a bargaining tool, is expected to linger over the markets, with potential effects on emerging markets.
  • Trump's administration is expected to maintain scrutiny and regulatory pressure on big tech, emphasizing the need for companies to moderate their content responsibly.

Conclusion

The podcast provided insightful commentary on the emerging competition from DeepSeek in the AI space and its repercussions on U.S. tech stocks. Additionally, it examined President Trump’s trading strategies regarding Colombia and their potential economic impact. Investors are advised to remain vigilant as these developments unfold, with clarity expected from the forthcoming earnings reports of major tech corporations.

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