Tech Stocks See Respite Amid AI Sell-Off
Apple and Meta Buck the Trend
Monday brought a rare glimmer of hope for tech investors, as Apple (AAPL) and Meta Platforms (META) stocks surged over 2%, defying the downward trend of their peers. This unexpected boost came on the heels of a steep sell-off in AI-related names, triggered by the release of Chinese firm DeepSeek’s innovative, cost-effective AI model.
Efficiency Gains Spark Optimism
According to DA Davidson analyst Gil Luria, Apple’s positive reaction to the DeepSeek news can be attributed to the potential for smaller, more efficient AI models, which would enable the company to develop better AI products for the iPhone. This development could be a game-changer for Apple, particularly in light of Meta CEO Mark Zuckerberg’s announcement that the company plans to invest up to $65 billion in AI this year.
Meta’s AI Ambitions
Meta has been working on building its own AI model, Llama, and DeepSeek’s breakthrough suggests that future LLMs could benefit from significant efficiency gains. This could be a major advantage for Meta, as it continues to invest heavily in AI research and development.
Chip Stocks Take a Hit
On the other hand, companies like Nvidia (NVDA) and Broadcom (AVGO), which manufacture AI chips that power these models, were among the hardest hit on Monday. The release of DeepSeek’s AI model, which is competitive with OpenAI’s latest offering, has raised concerns about the high costs associated with training these models.
A Shift in AI Investment
Venture capitalist Marc Andreessen has hailed DeepSeek’s latest R1 model as “one of the most amazing and impressive breakthroughs I’ve ever seen.” The reported cost to train this model was a mere $5.6 billion, a fraction of OpenAI’s estimated $100 million in spending to train GPT-4. This has sparked concerns that hyperscalers may be overinvesting in AI infrastructure.
Tech Stocks Struggle
Despite Apple’s stock rise on Monday, shares are still down 12% from last month, as AI-powered smartphones and PCs struggle to gain traction. The company’s stock was hit with two downgrades last week from Jefferies and Loop Capital, citing struggling iPhone sales. Apple is set to report earnings on January 30, and analysts are eagerly awaiting the results.
Analysts Weigh In
The majority of analysts recommend buying Apple stock, with a predicted rise to $246 over the next 12 months. As the tech sector continues to navigate the challenges and opportunities presented by AI, investors will be watching closely for signs of growth and innovation.
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