Markets rebounded in January from a December pullback as investors digested Trump’s day-one executive orders and solid earnings results from the banking sector. At the very end of the month, tariffs for Mexico, Canada, and China were announced. In response, each nation announced or said they will announce retaliatory tariffs or other trade restrictions. Uncertainty about the extent and duration of tariffs and the administration’s trade policies may cause volatility in markets. The S&P 500 finished January up 2.78%, while the Dow finished up 4.78%.
The fast-growing AI industry was disrupted in the month of January when DeepSeek, a Chinese AI startup, claimed a successful launch of an AI model that performs similarly to OpenAI’s ChatGPT, allegedly for a fraction of the cost. Prominent AI names like Nvidia saw declines of almost 17%, shedding nearly $600 billion in value. The cause for alarm was that DeepSeek claimed to be able to produce ChatGPT-like results, but without the latest-and-greatest chips from Nvidia, which DeepSeek said they couldn’t get due to Chinese sanctions. DeepSeek also claimed to have found a way to build their model with a mere $6 million versus OpenAI, which has used billions in funding to build ChatGPT. The stark difference left many doubtful. OpenAI and Microsoft, a major investor in OpenAI, have begun probing DeepSeek about distilling ChatGPT, a process where one AI model is essentially piggy-backing off the data of another AI model. As it stands right now, more is unknown than is known about DeepSeek, its true costs, how it was built, and what chips were used to make it. Since AI-linked stocks have commanded increasingly larger weights in indexes including the S&P 500 and NASDAQ 100, investors can likely expect more market volatility as further news comes out about DeepSeek’s technology.
