On Monday, Jan. 27, DeepSeek sparked a sharp sell-off in Wall Street's tech sector, casting doubt on the artificial intelligence (AI) boom driving the markets in recent years. DeepSeek, a China-based freesource AI company, calls its first model DeepSeek R1 and has rattled nerves in Wall Street. Per the company’s claims, R1 can almost mirror the capabilities of its better-known U.S. counterparts, including OpenAI’s GPT-4, Meta’s Llama and Google’s Gemini, but at a fraction of the cost.
What followed after the news broke was nothing short of a stock market bloodbath. Companies like NVIDIA Corporation NVDA, Marvell Technology, Inc. MRVL and Broadcom Inc. AVGO saw billions of dollars wiped out in a single session. There was palpable apprehension that by developing cutting-edge AI models with less advanced and more cost-efficient hardware, DeepSeek and Chinese technology would challenge the U.S. tech companies that are pouring fortunes into AI infrastructure.
Nvidia, the poster boy of the U.S. AI boom of the last 18 months, dragged the stock market with it, sinking 17%. A whopping $593 billion of the chipmaker's value was wiped out, a record one-day loss for any company in history. Broadcom lost 17.4%, Marvell shed 19.1%. The Philadelphia semiconductor index tumbled 9.2%, its biggest percentage drop since March 2020.
And yet, people like OpenAI CEO Sam Altman have gone on to openly acknowledge that if true, it is an impressive model. "We will obviously deliver much better models and also it's legit invigorating to have a new competitor!" Altman said on social media. Microsoft CEO Satya Nadella was also extremely positive in his assessment as he cited Jevons Paradox in his tweet, mentioning that as “AI gets more efficient and accessible, we will see its use skyrocket.”
In fact, this sentiment started taking effect toward the latter part of the day with big tech closing the day well off their session lows. With the Trump administration also focused on AI, competition in the tech world should be the harbinger of bigger, brighter things. This is certainly not the end of American exceptionalism in AI. On the contrary, this may be an excellent opportunity to buy the dip!
The stocks below flaunt a Zacks Rank #1 (Strong Buy) or Rank #2 (Buy) and positive returns. You can see the complete list of today’s Zacks #1 Rank stocks here.
NVIDIA is a graphic processing unit (GPU) designer and the world’s biggest chip maker. NVDA’s expected earnings growth rate for the current year is 126.2%. The Zacks Consensus Estimate for its next-year earnings has risen 1.9% over the past 60 days. The company has a return on equity (ROE) of 114.8% and currently carries a Zacks Rank #2.
Broadcom is a global technology leader in among other things, developing and supplying a wide range of semiconductors. AVGO’s expected earnings growth rate for the current year is 29.6%. The Zacks Consensus Estimate for its current-year earnings has increased 3.1% over the past 60 days. The company has a ROE of 28% and currently carries a Zacks Rank #2.
Marvell provides data infrastructure semiconductor solutions. MRVL’s expected earnings growth rate for the current year is 3.3%. The Zacks Consensus Estimate for its current-year earnings has increased 6.9% over the past 60 days. The company has a ROE of 4.6% and currently carries a Zacks Rank #1.
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Today, See These 5 Potential Home Runs >>NVIDIA Corporation (NVDA) : Free Stock Analysis Report
Marvell Technology, Inc. (MRVL) : Free Stock Analysis Report
Broadcom Inc. (AVGO) : Free Stock Analysis Report
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