From Semiconductors to HVAC, What DeepSeek Means for AI Stock Trades
The shakeup in the AI space has spread waves across the stock market. Here’s what investors need to know.
Chinese company DeepSeek’s R1 artificial intelligence tool upended the AI trade and sent some corners of the stock market tumbling on Monday. But what’s the takeaway for long-term investors?
AI-related stocks have staged powerful rallies since the spring of 2023. Reflecting the degree to which this trade has reached across the stock market, news that R1 could perform advanced tasks without the newest generation of the most sophisticated chips roiled various industries, ranging from those with the most direct connection to the technology, like semiconductors, to those with several degrees of separation, such as energy and some industrial stocks.
To help investors make sense of this unexpected news, with a focus on what it means for stock valuations, we’ve collected the takeaways from Morningstar’s equity analyst team.
DeepSeek and Semiconductor Stocks
Ground zero for the selloff was the semiconductor industry, starting with investor favorite Nvidia NVDA. What does the DeepSeek news mean for semiconductor stocks and valuations?
DeepSeek’s Implications for AI Competitors
The news that DeepSeek’s R1 has attained much the same level of functionality as OpenAI’s ChatGPT has potential implications for companies competing directly in this space, such as Microsoft MSFT, Alphabet GOOG/GOOGL, and Baidu BIDU, and for cloud infrastructure, which includes Amazon AMZN.
AI and Tech Stock Takeaways
Eric Compton, director of equity research for technology stocks, pulled Morningstar’s coverage together to offer a high-level view. The main takeaway: This was a healthy pullback for stocks that had been trading at lofty valuations, and that the future remains bright for AI.
What Does DeepSeek Mean for AI Utility and Energy Stock Plays?
Then there’s the raft of secondary plays in the AI trade that revolved around the premise that large language models require massive data centers with substantial electricity needs. Here’s what Morningstar analysts have to say about this group.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.
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