Business Rundown: China's DeepSeek AI Spurs Tech Stock Spiral
Jan 27, 2025
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Brian Jacobsen, Chief Economist at Annex Wealth Management, sheds light on the turbulence in tech stocks spurred by China's DeepSeek AI, showcasing its cost-effective capabilities. He emphasizes that this scenario might actually present a buying opportunity for savvy investors. Additionally, Jacobsen discusses the pivotal role tariffs may play in U.S. trade strategy, particularly in negotiations with Colombia. He encourages a strategic re-evaluation of tech investments, pointing to potential growth in healthcare and technology sectors.
The emergence of China's DeepSeek AI at a fraction of U.S. costs signals potential market disruption and a call for innovation among American tech firms.
The Trump administration's strategic use of tariffs in negotiations, exemplified by the Colombian situation, highlights a new approach to foreign relations and economic leverage.
Deep dives
Tariff Leverage in U.S.-Colombia Relations
The Trump administration's recent use of tariffs in negotiations with Colombia demonstrates a strategic approach to foreign relations. Following Colombia's refusal to accept deported migrants flown back from the U.S., President Trump threatened a 25% tariff on Colombian goods, which swiftly led to Colombia conceding to U.S. demands. This incident illustrates how tariffs can be utilized as a powerful negotiating tool, potentially paving the way for more favorable terms in international agreements. The scenario highlights a shift in diplomatic strategy where tariffs are seen not just as economic penalties, but also as mechanisms for achieving broader policy objectives.
Impact of DeepSeek on U.S. Tech Stocks
The emergence of a Chinese startup, DeepSeek, that can develop AI models at a significantly lower cost than U.S. counterparts, has raised concerns among American investors regarding the future of tech stocks. Reports indicate that DeepSeek spent approximately $5.6 million to train one of its AI models, in stark contrast to the $100 million to $1 billion spent by American firms. Despite the initial panic in the market, some experts view this as an opportunity for American companies to enhance their innovation and efficiency. This competition may compel U.S. tech giants to accelerate development and respond more effectively in the evolving AI landscape.
Navigating Investment Strategies in a Changing Market
Investors are urged to reassess their tech stock holdings in light of the recent developments involving AI innovations and tariff threats. Experts recommend a longer-term perspective, emphasizing the potential of various sectors beyond just those dominated by tech players, such as healthcare, real estate, and financials. The discussion indicates that the most significant profits may lie not simply with major tech firms but with companies that adopt newer technologies, including AI applications. As such, a focus on identifying companies within established industries that stand to benefit from advancements in technology could offer valuable investment opportunities.
Nervous investors are confronting a morning of sliding tech stocks after Chinese startup DeepSeek proved they could run a ChatGPT-style AI model for a fraction of the cost.
Over the weekend, the Colombian president was fighting with the Trump administration over migrant deportation flights. President Trump then threatened to level 25 percent tariffs on them, and by Sunday night, Columbia had backed down and agreed to U.S. terms.
FOX Business correspondent Gerri Willis speaks with Annex Wealth Management Chief Economist Brian Jacobsen about why DeepSeek’s AI causing turbulence in the market is actually a buying opportunity. Later, he explains why tariffs are going to be a key tool for President Trump’s administration.