The unveiling of a powerful artificial intelligence model by Chinese start-up DeepSeek has sent shockwaves through global markets, triggering a $600 billion sell-off in Nvidia shares—the largest single-day loss in US history. The unexpected breakthrough, which introduced an advanced reasoning model at a fraction of US development costs, sparked fears that China is rapidly closing the AI gap with Silicon Valley.
The market turmoil spread beyond technology stocks, hitting energy companies and utilities that were expected to benefit from soaring AI-driven power demand. Asset managers such as Brookfield, Apollo Global, KKR, and Blackstone were also caught in the rout, prompting questions about the irrationality of investor sentiment.
At the Global Alts Conference in Miami, leading investors debated whether the AI-driven rally in US stocks had gone too far. Hedge fund titan Ray Dalio compared the current AI stock surge to the dotcom bubble of the late 1990s, warning that “pricing has got to levels which are high at the same time as there’s an interest rate risk, and that combination could prick the bubble.”
Others took a different view. Billionaire investor Steve Cohen dismissed the panic, arguing that DeepSeek’s emergence was “bullish” for AI, pushing the field closer to artificial superintelligence. “It’s coming, and it’s coming quick,” he told the conference.
The Struggles of Short Sellers
While tech valuations have soared in recent years, the market’s relentless rise has made life increasingly difficult for short sellers. Nate Anderson, the founder of Hindenburg Research—one of Wall Street’s most feared activist short sellers—recently announced his exit from the business.
Anderson, who made headlines for high-profile bets against Nikola, Carl Icahn, and India’s Adani Group, joins a growing list of short sellers calling it quits. Jim Chanos shut down his hedge funds last year, while billionaire Bill Ackman abandoned activist short selling in 2022.
Industry experts point to legal battles, shrinking opportunities, and an unforgiving bull market as reasons for the decline. “Companies used to be very shy about litigating against short sellers, but now they are less shy,” said Gabriel Grego, founder of Quintessential Capital.
European Markets Surge Amid Tech Uncertainty
As investors reassess their AI-driven bets, European stocks have emerged as an unexpected winner. The Stoxx Europe 600 index gained 6.3% in January, outpacing the S&P 500’s 2.7% increase. The FTSE 100 hit a fresh record high, marking its best monthly performance in over a year.
Analysts say that fading fears of US trade tariffs and a shift away from overpriced US tech stocks have driven the surge. “After so many years of underperformance, it doesn’t take much to get people excited about Europe,” said Roland Kaloyan, a strategist at Société Générale.
