Well, not everyone . The FOMC kicked off their two-day meeting this morning, and while we know they are busy discussing inflation and the labor market, I’m also willing to bet they have one eye on equities. And the market, at least right now, is overwhelmingly dominated by the AI trade. Chinese AI startup DeepSeek spurred a $1 trillion rout in US and European tech stocks yesterday. Nvidia was a top loser. Shares closed 17% lower on Monday. Meta actually fared surprisingly well, paring losses early in Monday’s session after opening 3% lower. Microsoft lost more than 2% and Alphabet closed more than 4% lower. In Europe, Siemens energy plummeted as much as 19%. Lots to unpack here. First, what has investors so spooked? DeepSeek claims it trained its new AI model for cheap. Like, really cheap. $5.6 million to be exact. If that doesn’t sound like a deal, here’s a comparison to put things in perspective: Anthropic CEO Dario Amodei says building their models costs between $100 million and $1 billion. OpenAI said training GPT4 came with a nearly $100 million bill. Even if you don’t buy DeepSeek’s $5.6 million claims — and to be clear, we should all take this self-reported figure with a massive grain of salt — the company does seem to be operating with an efficiency that US-based AI companies just don’t have. DeepSeek also says it’s using a fraction of the computing power it takes to run other models, like Meta’s Llama, which ironically helped train R1. Thanks, open source. On that note, Mark Zuckerberg reportedly has assembled four different “war rooms” at Meta, each dedicated to analyzing DeepSeek. With earnings season looming, we expect most AI firms to have a similar set up. The “chip issue” is another pain point for US investors. Biden-era export restrictions on GPUs may not be working as well as we’d hoped. Or Chinese companies are finding other work-arounds. Either way, this raises concerns not only about demand for chip providers like Nvidia, but also about national security. Doom and gloom aside, investors apparently woke up this morning in a better mood. Or in the mood to take advantage of a discount, at least. Nvidia shares were back in the green, trading 7% higher at 2 pm ET. “Despite DeepSeek’s promise, we doubt the leading cloud vendors and AI builders will pause their plans, although it’s a risk that certainly bears watching,” Morningstar equity analyst Brian Colello said. “We believe AI GPU demand still exceeds supply, so while slimmer models may enable greater development for the same number of chips, we still think tech firms will continue to buy all the GPUs they can as part of this AI ‘gold rush.’” Nvidia execs will have some tough questions to answer on their Q4 earnings call. Lucky for them, they have about four weeks to prepare. As far as tomorrow’s FOMC decision, markets are overwhelmingly expecting central bankers to hold interest rates steady. I doubt Powell will comment much on the AI situation, but I wouldn’t be surprised if he’s asked about it during the press conference. Keep an eye on your inbox tomorrow for updates. Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter . Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the Forward Guidance newsletter . Get alpha directly in your inbox with the 0xResearch newsletter — market highlights, charts, degen trade ideas, governance updates, and more. The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.
