3 stock market thoughts amid the DeepSeek sell-off 🤖

Capitalism can come with violent moves in the markets 🥵

A small Chinese AI startup has emerged to challenge the giants of Silicon Valley. (Image was generated using AI)

Monday was a reminder that investing in the stock market is an unpleasant process.

The S&P 500 fell as much as 2.3% in early trading before closing down 1.5%, led by sharp declines in Big Tech names including Nvidia, Broadcom, and Oracle.

The catalyst for the market rout appears to be the emergence of DeepSeek R1, a Chinese artificial intelligence (AI) startup that can do what the buzzy American AI startups can do but at a fraction of the cost. Read more about DeepSeek R1 here.

So a productivity-enhancing technology in high demand has gotten cheaper. Isn’t that a good thing?

For users of this technology: It’s great news because it means costs are coming down, which is great for profit margins.

For providers of this technology: It’s bad news because it means prices are coming down, which is bad for profit margins.

For those of us invested in broadly diversified index funds like those tracking the S&P 500, this is unpleasant because mega-cap AI tech providers have been responsible for much of the stock market’s gains in recent years.

This is a developing story, so there’ll be much more information to come.

For now, here are three initial thoughts for stock market investors.