The S&P 500 closed lower on January 31 but still ended the month up 2.6%. However, the market faced significant turbulence as DeepSeek, a free AI-powered Chinese chatbot, debuted, triggering a massive tech selloff. Nvidia (NVDA) plunged 17% in a single day, leading declines across AI-related stocks. Adding to volatility, Trump imposed new tariffs on Canada, Mexico, and China, briefly erasing the month’s gains just hours before the market closed. As Trump’s presidency begins, investors should brace for continued uncertainty in policy and market reactions.
The Nvidia Selloff: Market Shift or Sector Weakness?
The #NVDA decline may not necessarily signal a broader tech downturn. Instead, it appears that institutions took profits after a massive 2024 rally, where Nvidia more than doubled, leading to high daily trading volume. Despite the sharp drop, NVDA found support at its 9-month uptrend line and 200-day SMA, suggesting technical resilience.
While NVDA shed nearly $600 billion in market value, it did not trigger a systematic selloff. Other Magnificent Seven stocks, such as Apple (#AAPL), Meta (#META), and Tesla (#TSLA), posted gains, indicating that institutions rebalanced their portfolios as NVDA had become overbought—surging over 2700% in the last five years.
Investors should closely watch NVDA’s 200-day SMA and key support levels around 90 to assess whether its uptrend remains intact or signals a structural shift. Meanwhile, Microsoft (#MSFT) is showing signs of long-term weakness, remaining stuck in a year-long consolidation range, which could indicate fading momentum.
DeepSeek and AI: The Bigger Picture
While #NVDA remains under pressure, falling from first to fourth place in S&P 500 market cap rankings, the key concern isn’t just DeepSeek’s impact—it’s the broader future of AI. As Greg Jensen (Co-CIO, Bridgewater Associates) wrote in his latest investor note:
“Does DeepSeek’s success suggest AI models can be quickly matched by competitors—making good AI models a commodity? If so, which companies will emerge as winners, and which will lose pricing power? Will leading AI labs continue investing in innovation, or could funding slow, creating a headwind for growth? If AI investment declines, what does that mean for the pace of future breakthroughs? And how much should we trust the claims about DeepSeek’s capabilities?”
The bull market narrative has been fueled by AI and Fed policy, but with interest rates holding steady and inflation concerns persisting, the AI-driven rally is entering a critical phase. As valuations stretch further from historical norms, the market could be approaching a late-stage rally, making key players like Nvidia essential in determining the next move.