This week saw AI rivalry intensify and major tech earnings shake up the market. DeepSeek’s breakthrough rattled U.S. tech giants, while Microsoft and Meta’s results underscored the rewards—and risks—of AI investments. Here’s what’s driving Wall Street’s latest moves.
The AI race took an unexpected turn this week, with Chinese AI startup DeepSeek shaking up the tech industry and forcing investors to reassess their confidence in U.S. AI giants. DeepSeek’s low-cost, high-performance AI model sent shockwaves through Silicon Valley, triggering a sell-off in AI-heavy stocks like Nvidia, Microsoft, and other hyperscalers as Wall Street questioned the sustainability of their sky-high valuations.
But it wasn’t all bad news. Meta and IBM delivered stellar earnings, sending their stocks soaring. IBM surged 13% in after-hours trading, its best rally since 2000, as investors cheered its AI-driven growth strategy. IBM also outperformed expectations, solidifying its position as an AI leader in enterprise solutions. Wall Street rewarded both companies, proving that strong fundamentals and a clear AI roadmap still pay off.
Meta kicked off the excitement with an impressive fourth-quarter earnings report for 2024. The tech giant’s revenue soared 21% year-over-year to a hefty $48.4 billion, outpacing analysts’ estimates. Net income followed suit, leaping 49% to $20.83 billion, while earnings per share of $8.02 beat expectations handily. CEO Mark Zuckerberg highlighted a $13 billion annual revenue run rate from Meta’s AI business, with plans to invest $60-65 billion in AI-related capital expenditures in 2025. Despite recent chatter suggesting cutting-edge AI might demand fewer resources, Zuckerberg took a measured stance:
“It’s probably too early to really have a strong opinion on what this means for the trajectory around infrastructure and CapEx. There are a bunch of trends that are happening here all at once.”
While Microsoft continues to champion its AI-first cloud solutions, its latest earnings triggered a 5% dip in shares, raising questions about whether massive AI outlays are paying off quickly enough. AI-related losses tied to OpenAI hit $2.29 billion—overshooting forecasts by $790 million—and capital expenditures nearly doubled to $22.6 billion year-over-year. Still, CFO Amy Hood signaled confidence that higher costs can eventually yield stronger returns:
“The mix of spend will begin to shift back to short-lived assets, which are more correlated to revenue growth.”
Apple saw a 4% revenue bump in its first quarter, but lukewarm iPhone sales and an 11.1% drop in China raised eyebrows. With AI increasingly shaping market narratives, investors are watching closely for Apple’s next move. For now, the company’s path to AI leadership remains a question mark.
Stealing headlines is DeepSeek’s efficiency-first AI model, which promises top-tier results without the hefty GPU investments that have become the norm. This cost-friendly approach has developers buzzing—and puts pressure on established hardware players like Nvidia. Suddenly, the idea that you can’t build AI without bottomless spending is being challenged.
Yet, while Wall Street reacted with caution, the AI developer community embraced DeepSeek. AI engineers have been buzzing about its efficiency, seeing it as a game-changer in democratizing AI access without premium hardware costs.
One AI enthusiast, FrankDeGods, summed up the excitement:
“I’ve been using DeepSeek for 20 minutes, but I’m pretty sure this is the best thing in AI since the original ChatGPT.”
The question now is whether this week’s market shake-up signals an AI revolution—or just an evolution. With China proving it can compete without billion-dollar budgets, the focus is shifting from AI spending wars to efficiency and real-world adaptability.
As the AI supercycle unfolds, investors are now asking: Who will turn AI into real profits first—and who’s just throwing money at the hype?
Monday’s $1 trillion stock wipeout may have rattled investors, but Goldman Sachs insists it’s not the start of a bear market. "In our view, this is a correction and not the start of a sustained bear market," said analysts led by Peter Oppenheimer on Wednesday. They argue that strong macroeconomic conditions will keep markets afloat, with recession risks at just 15% over the next year and moderate rate cuts expected as inflation continues to cool.
While DeepSeek’s AI breakthrough stirred market sentiment, Goldman maintains that bear markets typically emerge from falling profits and recession fears—neither of which are in play. The sell-off may have been painful, but according to Goldman, it’s just a recalibration, not a collapse.
As the week progressed, DeepSeek’s rise continued to rattle Washington, with Donald Trump acknowledging the disruptive power of China’s AI advancements. Addressing Republican lawmakers, he remarked:
“Today and over the last couple of days, I’ve been reading about China… coming up with a faster method of AI and much less expensive method.” While some see it as a threat to U.S. dominance in AI, Trump framed it differently, adding: “That’s good, because you don’t have to spend as much money. I view that as a positive, as an asset.”
Meanwhile, the U.S. is doubling down on big AI investments, pouring $500 billion into Stargate, a project led by OpenAI and Oracle aimed at securing American leadership in AI infrastructure. But with DeepSeek overtaking ChatGPT on Apple’s App Store and proving that smaller, more efficient models can compete, analysts are questioning whether throwing money at AI will be enough.
As the first month of the year comes to a close, the AI race is only gaining momentum. With Alphabet (Feb 4), Amazon (Feb 6), and Nvidia (Feb 26) set to report earnings, the stakes are high—will hyperscalers turn AI investment into profit or just burn through cash? Meanwhile, China’s DeepSeek is making its move, signaling even more disruption ahead. The question remains: Who will lead, and who will be left behind?
From TikTok’s dance-off to Instagram’s copycat moves, this week saw Trump forge powerful alliances with Silicon Valley’s elite. The launch of the $500B Stargate AI initiative and the fierce rivalry between Elon Musk and Sam Altman highlight a new era where politics and tech collide.
Cisco faces fallout from a massive data leak exposing critical files, while China accuses the U.S. of cyber espionage amid rising tech tensions. AI governance sparks debate as Europe enforces strict rules, and ASIC sues HSBC for $23M scam failures. Global cyber affairs take center stage this week.
The week saw cyber threats shadow Black Friday’s $70B sales, AI reshaping banking, and Meta’s nuclear energy ambitions. ByteDance and Nvidia clashed in the U.S.-China tech war, while Australia pushed Big Tech to fund journalism. A turbulent digital landscape sets the stage for 2025.
The Pacific tech war intensifies as Trump's return to power amplifies U.S. export bans, targeting China’s AI progress. ByteDance, Nvidia's largest Chinese buyer, counters with bold strategies like crafting AI chips and expanding abroad. A fragmented 2025 looms, redefining tech and geopolitics.
