Stocks bounce back following introduction of affordable AI platform that triggered a sell-off
After the release of a new, more cost-effective AI platform by Chinese startup DeepSeek, the U.S. stock market saw a significant sell-off that was quickly recovered in just four sessions. The launch of this platform, which outperformed ChatGPT in terms of efficiency and cost, raised concerns among investors about the need to invest in higher-cost AI companies. This led to a sharp decline in shares of major chipmakers and data centers, but resilient quarterly earnings reports and a less hawkish stance from Federal Reserve Chair Jerome Powell compared to December helped restore confidence among investors, prompting them to buy the dip.
Although the market bounced back, Nvidia suffered a 10% loss for the week as a result of the initial sell-off. On the monetary policy front, the Federal Reserve decided to keep interest rates steady at 4.25%–4.50%, with Powell hinting at the possibility of future rate cuts by acknowledging that current monetary policy is “meaningfully restrictive.”
Cruise lines, on the other hand, had a successful week with companies like Royal Caribbean, Norwegian Cruise, and Carnival all seeing double-digit percentage gains following strong earnings reports from Royal Caribbean. This positive performance was in stark contrast to UPS, which experienced a significant drop of about 15% — its worst week since September 2008 — after announcing plans to phase out over 50% of its volumes in a deal with Amazon by the second half of 2026.
President Donald Trump’s announcement of 25% tariffs on imports from Mexico and Canada caused concerns among analysts about potential economic disruptions in North America. The U.S. automotive industry was highlighted as one of the sectors that could be severely affected by such tariffs. Despite these uncertainties, General Motors exceeded earnings expectations last quarter with strong revenue growth. However, the company incurred over $5 billion in charges due to changes in its Cruise robotaxi business and restructuring operations in China.
In the tech sector, analysts closely examined Microsoft’s quarterly results, particularly focusing on the growth slowdown of its cloud computing platform Azure. Despite challenges in the cloud computing space, Microsoft remains an attractive investment choice due to its advancements in artificial intelligence.
Amazon’s increased ad spending on the social platform X and Apple’s potential return to advertising on the same platform under Elon Musk’s leadership signaled a positive shift in advertiser confidence. This move hints at a potential recovery in advertisement spending on the platform.
In conclusion, while the stock market faced initial turbulence due to the introduction of a new AI platform, factors like positive earnings reports, interest rate stability, and optimistic outlooks on certain sectors contributed to a quick recovery. The varying performances of different industries and companies underscore the importance of staying informed and agile in navigating the ever-changing landscape of global markets.