Summary
- The
market reacted strongly to the unveiling of China`s AI, DeepSeek, with
AI stocks plummeting and REITs and utilities trading up significantly.
- Investors
are shifting towards predictable returns from REITs and regulated
utilities, which offer 8%-10% expected returns, amid uncertainties
surrounding AI`s future profitability.
- The
DeepSeek news has made the steady cashflows of REITs and utilities more
attractive as the allure of AI`s unbridled growth diminishes.
- Looking for a helping hand in the market? Members of Portfolio Income Solutions get exclusive ideas and guidance to navigate any climate.
Market`s perception of the news
The market clearly thinks DeepSeek is really bad news for AI plays. These companies which were previously perceived to have large moats were presumably overtaken by a start-up that wasn`t even allowed access to the best chips.
Maybe the moat is still intact, maybe it is irrevocably shattered. I don`t know, but more clarity will be found in the coming weeks and months.
More interesting to me is how powerful the response was in non-AI stocks, particularly the boring and predictable sectors like REITs and utilities...
The news was everywhere, so I`m sure you already heard that the Chinese unveiled their newly developed AI, DeepSeek (DEEPSEEK), which is presumably more efficient than ChatGPT and trained using fewer resources. I am not an AI analyst, so I am not equipped to verify these claims. Instead, I want to talk about the massive market response to the news and why seemingly unrelated sectors like REITs and utilities traded up significantly on the day. AI stocks got clobbered.
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- - Volume: 25 - WEEK: 6 Date: 2/4/2025 3:27:42 PM -