US Retail Investors Dive into Tech Stocks Amid DeepSeek Selloff

In an unexpected turn of events, US retail investors have been net buying tech stocks and ETFs on Monday, January 27, 2025, despite the market sell-off triggered by the DeepSeek AI model's release. This behavior aligns with their focus on earnings as the primary driver of stock performance, as they targeted large-cap tech ETFs and individual tech stocks with promising earnings prospects.



The DeepSeek AI model, developed by Chinese startup DeepSeek, has raised concerns about the market's overvaluation of tech shares and Big Tech's overspending on AI development. The model's performance, on par with or even exceeding that of US rivals like OpenAI, has led to a selloff in AI-related stocks, with Nvidia (NASDAQ: NVDA) and other chipmakers experiencing significant losses.



However, several analysts have raised doubts about the market's reaction, suggesting that the sell-off could present an opportunity for investors to pick up beaten-down AI names. Wedbush analysts called Monday a "golden buying opportunity" for tech stocks, while Bernstein analysts maintained "outperform" ratings for Nvidia and Broadcom (AVGO), calling the market reaction "overblown."

Retail investors' focus on earnings as the primary driver of stock performance is evident in their buying behavior, as they targeted large-cap tech ETFs and individual tech stocks with promising earnings prospects. These companies include Nvidia, Broadcom, and Taiwan Semiconductor Manufacturing (TSM), which have shown strong earnings growth and are expected to continue performing well due to their involvement in the AI and semiconductor industries.



In the long term, these companies and sectors are well-positioned to benefit from the continued growth and adoption of AI technologies. Their strong fundamentals, leadership, and exposure to AI-related markets should enable them to maintain a competitive edge and drive shareholder value. However, investors should continue to monitor the AI landscape and the performance of these companies to make informed investment decisions.

As the market continues to grapple with the implications of the DeepSeek AI model, retail investors appear to be taking a calculated risk by buying into tech stocks at discounted prices. While the long-term prospects of these companies remain strong, investors should remain vigilant and prepared to adapt to any changes in the market landscape.