Cheap Chinese AI spooked markets, but Big Tech shrugged it off

Photo: Alex Luna · Pexels

For a few hours, markets feared the artificial intelligence party might be ending. The emergence of DeepSeek, a Chinese model claiming results similar to its US rivals at a fraction of the infrastructure cost, triggered a broad selloff among AI-linked stocks. The logic behind the scare was simple: if training advanced models costs far less than assumed, the massive investments US tech giants are pouring into data centers and chips might not be as justified.

Yet the market's subsequent analysis went in the opposite direction. Several voices in the sector argue DeepSeek won't sink the major US artificial intelligence names, and firms like Citi contend that market consensus still underestimates the future revenue and returns this technology can generate.

Earnings as a thermometer

That view was reinforced by actual earnings data: Palantir soared after posting figures that far exceeded expectations, with its US commercial business nearly tripling. At the same time, Nasdaq futures held up thanks to optimistic AI forecasts, in contrast to the initial pessimism sparked by the DeepSeek episode.

The episode leaves an underlying lesson: in a sector where expectations move as much money as actual results, a single piece of news can trigger sharp swings that later correct just as quickly as they appeared.