That’s ridiculous! But it goes to show there is a lot of dumb money in the market and the smart money traders are more than willing to take advantage of them.
The Tech Sector Took a Beating—Here’s Why!
Let’s break it down. Recent reports suggest that DeepSeek, a Chinese AI startup, developed its advanced AI model in just two months for less than $6 million, using comparatively cheap semiconductor chips. Yes, you read that right—$6 million. This bombshell has thrown the entire AI race into disarray, prompting analysts to question whether the U.S. tech giants’ billion-dollar AI budgets were just extravagant overkill. After all, if DeepSeek can achieve this with a fraction of the resources, then why are American firms spending like there’s no tomorrow?
The fallout has been brutal. The announcement triggered a sharp sell-off in major tech names, with Nvidia, Microsoft, and TSMC taking heavy losses. Some of the so-called “experts” are even arguing that U.S. companies could learn a thing or two from DeepSeek’s approach to lean AI development. Sure, that sounds great on paper, but let’s not pretend these same experts weren’t the ones hyping the same companies now being pummeled in the market.
My Take
This whole thing is ridiculously overblown! But overblown or not, the fallout is real. The tech sector—particularly the big names that were leading the market reversal—just got hammered. And why? Because overblown valuations gave traders a perfect excuse to sell on fear.
So how long will this last? Good question. Here’s the setup.
- The Fed’s upcoming announcement: Normally, we’d expect the Federal Reserve to calm nerves and stabilize the market. But this time? Nobody’s expecting anything groundbreaking from them.
- Earnings season pressure: Tesla reports on Wednesday, and I’d bet good money on disappointment. Even Elon Musk the master PR man will have a difficult time spinning positivity into Tesla when the market is nervous and looking for reasons to sell. On Thursday, Apple reports, and I’m anticipating the same story there. Even if both reports are solid, the press will likely dig up some minor concern and blow it out of proportion. It happened with Meta last year—I owned the stock then, so trust me, I know.
This brings me to the big takeaway: I’VE BEEN SAYING! If you see an opportunity to take some money off the table, don’t hesitate. This market is nervous, and it will stay that way until we get a proper correction—something in the ballpark of 10% or more. The issue isn’t earnings. The issue is valuations that are stretched to the breaking point. Institutions have made hefty profits, and they’re itching to lock them in.
If you were in the tech sector, you most likely thought the entire market was caving. But that wasn’t the real story.
Below are the advancing stocks and declining stocks from Friday, 1-24-2025.
Below are the advancing stocks and declining stocks from today.
The Real Story
If you were in tech today, you probably felt like the whole market was caving in. But that’s not the full picture. Let’s look at the data.
- NYSE: Advancing issues outpaced by declining ones today.
- NASDAQ: Nearly 500 more stocks declined today compared to Friday.
This tells the story. Institutions aren’t pulling money out of the market entirely; they’re just rotating out of overpriced tech into stocks with more reasonable valuations. And not miss the opportunity to make profits.
Here’s the bottom line
While the DeepSeek rumors are the spark, the real fire is being fueled by overstretched valuations and institutional profit-taking. Stay sharp, and don’t get caught up in the hype. Fear and nervousness creates bad decision-making.