AI Sell Off Presents an Opportunity

This recent market sell-off may present an opportunity. There has been much discussion online about what DeepSeek means for the AI industry in the US. Allegedly, the company trained their model on old Nvidia chips and for only $ 6 million. Gradually though, there seems to be loopholes to this story and I suspect that we will hear more theories about whether these allegations could be true.

But the reason the market sold off is simple. Investors and traders have started to question whether the big budgets that AI companies have talked about are really necessary. They’re also questioning whether we need the most advanced chips from Nvidia for all that computing power.

This question came up even before DeepSeek. Investors want to see the return on their capital, and that will likely be the subject of discussion during the next few earnings calls with the Mega Cap tech companies.

Be that as it may, I think there is still a path for AI and this is not a fad that’s going away. The companies may have to justify their spending, but there is a long road to ultimately making AI viable for improved productivity and to make it “sentient”, for lack of a better word.

So I think this sell-off could be an opportunity to invest in some of the companies that are peripheral to the AI growth story. I’m not talking about the Mag 7. I think they are overvalued and overdone. Having said that, I wouldn’t stop anyone from buying the dip in these companies either because they are solid companies, with more than just the AI story. I’m generalizing here.  

Over the past two days we’ve seen some interesting companies take a severe hit to their price because they are connected to the AI story. I do consider some of the drawdown as overdone, and it presents a window to buy these companies. The consensus is that while there may be a slowdown in AI spending, it will eventually pick up. So patience will be required with the recovery of these companies.

Here are a few names that I either hold and would consider adding to, or starting a position in. As always, this is not investment advice but just my views of where I would put my money to capture some upside from the AI story.

Subscribe to Premium to read the rest.