Australian investors, who for years have piled their savings and super into our big four banks and a couple of massive mining companies, with a smattering of Telstra, Wesfarmers and CSL shares in the mix, can watch the US tech meltdown from their armchair bunkers.
In a general sense, this is not a point of which Australian business should feel proud. Sure, the big IT names in the US that form much of the fabric of the now China-challenged AI space have been sucker-punched in the short term, and possibly in the medium term, but they have a future.
The issue which investors will have to grapple with is whether the immediate response to the emergence of China’s DeepSeek has been overdone, and to what extent the new kid on the block has undermined America’s AI players.
The likes of Elon Musk have already raised questions about DeepSeek, accusing the company of lying about its limited use of Nvidia chips.
Musk took to X to claim that DeepSeek “obviously” had more Nvidia chips than it had claimed.
Fellow sceptic Scale AI’s Alexander Wang said if Musk’s allegations were true, it would mean the Chinese model required far more power than it claims.
While it may be safer to be sceptical about the sceptics, it is fair to say that a bit more detail out of China would be useful in informing investment decisions about America’s big AI players.
Loading
There have been massive fortunes made (and lost) by risk-takers who bet that black swan events such as the entry of DeepSeek elicit a sharemarket overreaction. For them, this will be seen as a buying opportunity. Nvidia, for example, which fell more than 16 per cent in a day, retraced a quarter of these losses at the end of the session and in after-hours trading.
Nvidia, a company which has come out of obscurity in the relatively short space of five years, is no stranger to share price volatility. While its shares gained 90 per cent over the past year, it has experienced some big one-day falls during that time.
For its part, Nvidia painted the DeepSeek announcement in a more positive light, saying the Chinese company would require more of its chips.
The wildcard in how this plays out must be President Donald Trump, who is fresh from telegraphing his administration is turbo-charging investment in America’s AI capabilities. Just how long he will allow China to get around export control regulations that prevent certain US chips being sold to China remains to be seen.
He won’t want to stand by while the US slips behind in its technology cold war with China.
The Market Recap newsletter is a wrap of the day’s trading. Get it each weekday afternoon.
