The tech rout spurred by the emergence of Chinese AI startup DeepSeek could have been a lot worse, if some investors didn’t view the selloff as a buying opportunity. Stocks struggled during Monday’s session. The S & P 500 slid 1.5%, while the tech-heavy Nasdaq Composite fell 3%. The Dow Jones Industrial Average — which has more exposure to companies tied to the real economy than they do to tech — was the outperformer, up 0.7%. But that wasn’t nearly as bad as what the selloff could’ve been. At one point during the session, the S & P 500 and Nasdaq were down 2.3% and 3.8%, respectively. The 30-stock Dow was off by nearly 400 points, or 0.9%. Wall Street’s fear gauge — the CBOE Volatility Index — spiked above the 20 handle earlier in the session, but then fell back around 18 as the day wore on. A reading above 20 implies an elevated level of volatility in the market. .VIX 1D mountain VIX In spite of the initial reaction, more investors came to view some of the buzz around DeepSeek — with its cheaper, competitive AI model casting doubt on the money U.S. megacaps are spending on artificial intelligence infrastructure — as an overreaction. They say that the open source model will drive down costs for hyperscalers, which could benefit the large and well-capitalized companies. Apple and Meta , for example, were trading higher Monday, possibly a sign investors expect lower AI costs will improve the bottom lines for the businesses. “What they showed was, we can take an open source model, we can make it available and drive down costs like we did with the internet. Because, right now, what we have with AI is centralized, it’s closed, it’s more expensive, and there are a few players,” Ray Wang, principal analyst at Constellation Research, told CNBC’s “Money Movers” on Monday. “And in the open source model, like the Internet, it was decentralized, more players, cheaper and available to everybody. And that’s a good thing in general for AI.” “So, once the market digests that and realizes that China is not as far ahead as what the American companies are, they’ll realize that, ‘Hey, the West is still ahead.’ And of course, we’ll see the stabilization,” Wang continued. Similarly, Deepwater Asset Management’s Gene Munster said he expects the market is “overreacting” to DeepSeek’s success, saying investors are underestimating the need for an AI infrastructure buildout. “Most likely, the DeepSeek ‘breakthrough’ represents some step forward in chip architecture. It’s unclear if it’s a 5% or 500% improvement,” Munster wrote on X. “What’s being missed today is if there is a more efficient way to train models, it could increase the level of investment to build AI infrastructure given the prospects of reaching artificial general intelligence are more achievable.” ‘Pick your spots’ That could present a buying opportunity in a number of megacaps, which took a major hit Monday after the DeepSeek news gained traction over the weekend just ahead of their earnings results this week and next. Micosoft and Tesla are down more than 2% each. Both companies post earnings Wednesday. “It looks like, to me, actually, a buying opportunity,” Constellation Research’s Wang said. “A lot of these companies are basically duopolies in their marketplace. There really is no competition at the moment, and this outside, external force is only going to push more exponential efficiency.” Louis Navellier, founder of Navellier & Associates, also wrote to investors: “This feels like a buying opportunity.” “It’s all about the reset of AI cost expectations affecting the companies involved in building out the NVIDIA-based systems,” Navellier wrote. “The DeepSeek solution appears to be primarily a clever software solution to AI learning, rather than something that makes existing AI systems obsolete in some way. It would seem likely that the new software shortcuts can be employed by the American AI systems to make them even more powerful.” Still, other investors are urging caution as analysts review the new AI model to understand its implications, as they wait for a better entry point into equities. Nvidia , for example, tumbled 16.9% Monday , but also dipped below its 200-day moving average for the first time in two years — signaling a deterioration in the long-term upward trend in the stock. Hightower Advisors’ Stephanie Link said she would take the day to choose her positions, favoring Amazon and Broadcom herself for their diversified business separate from the AI theme. “Today, I get the reactions,” Link said. “Let it settle, and you pick your spots.”
