Breakfast News: DeepSeek Rocks Tech Stocks
January 27, 2025
| S&P 500 6,101 (-0.29%) |
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| Nasdaq 19,954 (-0.5%) |
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| Dow 44,424 (-0.32%) |
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| Bitcoin $105,337 (+2.13%) |
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Source: Image created by JesterAI.
1. Futures Down on China’s AI Competition
Nasdaq futures open the week down 2.5%, rocked by the rapid rise of Chinese AI startup DeepSeek and its flagship LLM, R1. Using older-generation chips from Nvidia (NVDA 8.93%) – which itself fell 13% in pre-market trading – DeepSeek developers say they trained their V3 model for less than $6 million in just two months.
- “Open source models are surpassing proprietary ones”: Yann LeCun, chief AI scientist at Meta (META 2.19%), spoke at last week’s World Economic Forum in Davos, saying DeepSeek’s creators “came up with new ideas and built them on top of other people's work.”
- Why it matters: Hyperscalers Microsoft (MSFT 2.91%), Alphabet (GOOG 1.70%), Meta, Amazon (AMZN 1.16%), and Oracle (ORCL 3.61%) plowed an estimated $197 billion into AI in 2024. Fears it might not have been their best use of capital could weigh on high stock valuations.
2. Investors Turn to Mag 7 Results
Four of the Magnificent Seven release earnings this week, after helping drive the Nasdaq 100 up by $15 trillion since the end of 2022. Microsoft, Tesla (TSLA 0.24%), and Meta report Wednesday, with Apple (AAPL 3.65%) following on Thursday.
- “We know how stocks react if they miss on what everyone wants them to hit”: Bloomberg’s Michael Casper is wary as profit forecasts indicate the slowest quarterly Mag 7 growth for nearly two years.
- “No small task”: After CEO Mark Zuckerberg shared Meta’s plans to bring online 1GW of compute this year, Fool analyst Jason Moser highlighted the scale of this goal: “How much power is a gigawatt anyway? Well, according to the US Department of Energy it's equal to 100,000 LED bulbs. Or 1.3 million horses. Or half a Hoover Dam. Or 2,627 Tesla Model 3s.”
3. An Epic Week of Earnings
Picking out a few more of the many companies reporting this week, Stock Advisor rec Starbucks (SBUX 0.39%) will post Q1 results tomorrow, as its "Back to Starbucks" initiative aims to turn round a year of missing earnings expectations. Revised growth plans should be in the pipeline after the company suspended its previous targets.
- Atlassian Intelligence: Rule Breakers recommendation Atlassian (TEAM 2.50%) reports Thursday. With data drawn from its global cloud software reach, management sees a potential advantage for boosting AI-powered productivity.
- An annual dividend of $6.52 per share is expected: Dividend Investor rec Chevron (CVX -0.65%) will post Q4 earnings Friday, with lower revenue anticipated to lead to a decline in earnings year over year.
4. What to Watch on Monday
SoFi Technologies (SOFI 0.56%) hit a 52-week high on Friday, ahead of Q4 earnings due before today’s opening bell. The digital financial services company is up 135% in the past 12 months, but it’s ahead of a consensus target from 18 analysts.
- SoFi has beaten EPS estimates in each of the past four quarters: In the third quarter alone, membership numbers grew 35%. Analysts expect earnings to more than double in 2025, to 29 cents per share.
- “Share gains will be driven by younger consumers”: Andrew Jeffrey of William Blair investment bank is bullish, but the Wall Street Journal notes 12.2% of the stock is sold short.
5. Foolish Fun
What stock will rise more than 10X over the next decade, and – more importantly – why? Discuss with friends and family, or become a member to hear what your fellow Fools are saying!
