Rise and shine everyone!

It’s turning out to be an ugly Monday morning. We’re seeing US Equity Futures start to melt down, driven lower by the Nasdaq, NVDA, and the rest of the Mag 7.

NVDA is down over 12% in the pre-market.

It would seem that mainstream and social media have been hitting the DeepSeek stories very hard, and there are a lot of questions surrounding the current AI investments from some of the Big Tech companies.

This was already an issue. If you remember, we’ve been talking about investors starting to question what the Mag 7 is doing with their money, as far as AI is concerned and when we’re going to see some tangible returns. DeepSeek allegedly being developed with just $6 million is now bringing all of this to head even more.

The other discussion is around the chips. Apparently, the model has been developed with very “old chips” which suggests that maybe we don’t need all that computing power for AI. Personally, I don’t think it’s that simple of an explanation.

I am no tech expert, but guess what? The people making the decisions to dump these stocks are also not really tech experts. So here are a few things to consider:

• With AI being a top agenda for President Trump, and the most powerful companies in the US, will there be no repercussions?

• How much truth is there in what is being discussed about the development of DeepSeek and how comfortable are people with using Chinese tech?

• This is the best week for this news since we get earnings reports from Meta and Microsoft. Tesla also reports and there will likely be some AI discussions there. But bottom line, we get to ask the hard questions and hear these companies defend their spending position.

The other big story this morning was Colombia. Basically, they refused to take back their people, and President Trump threatened a series of actions including a 25% tariff. The Colombian government soon reversed its position and opened its borders. The issue is not the tariff. The issue is the uncertainty.

This is a repeat of the previous presidency when one tweet moved markets. We’re in for another 4 years of uncertainty, and headline risk. Trading markets like this can be challenging, albeit fun. But it requires a lot of patience.

We haven’t even started the week, and it’s already been so eventful. We have a huge host of macro data this week, alongside one of the busiest weeks for earnings season. We have the Fed decision on Wednesday, the GDP growth numbers on Thursday and PCE inflation numbers on Friday. It’s not going to be easy.

Chart of the Day

In a chip constraint world in China, many players have maximised their model output. This is not just Deepseek; many established players have a large number of AI products. - Goldman Sachs

What we’re watching

• The discussion developing around DeepSeek and where the bleeding stops. Quite often, deep sell off’s like this trigger systematic selling which can further exacerbate the situation. I don’t think this is the beginning of the end but, we need to wait until the selling stops.

• Nucor earnings after market close - The company has seen its stock price come under pressure over the last few quarters. Part of the reason for this has been the dumping of Chinese steel into US markets via Mexico.

Calendars

(news taken from Reuters, FT, Bloomberg; Calendar from Trading Economics)