The DeepSeek effect
Markets are on edge on Monday, as global tech investors face a $1 trillion wipeout. The cause: anxiety that the emergence of powerful — and cheap — Chinese artificial intelligence software could upend the economics of A.I.
Nasdaq futures have plummeted nearly 4 percent. And shares in Nvidia, the chipmaker whose processors help train and run A.I. software, are down 11 percent in premarket trading. Those in Constellation Energy, a utility betting heavily on powering A.I. data centers, are down nearly 13 percent.
Meanwhile, tech executives and policymakers have been left to wonder how strong America’s lead in A.I. is.
DeepSeek is forcing a reckoning in Silicon Valley. The company’s models appear to rival those from OpenAI, Google and Meta, despite the U.S. government’s efforts to limit China’s access to leading-edge A.I. technology. And DeepSeek says it did all this with a fraction of the resources that American competitors use.
Over the weekend, DeepSeek shot to the top of Apple’s App Store charts, rivaling ChatGPT. And DeepSeek is drastically undercutting OpenAI on price.
That raises a number of questions:
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Do leading A.I. companies like Google, Meta and the privately held OpenAI and Anthropic deserve their astronomical valuations?
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Do companies need to spend hundreds of billions on vast data centers powered by hugely expensive chips from Nvidia and others? Consider that OpenAI and its partners have promised to spend at least $100 billion on their Stargate project, or that Microsoft said it will spend $80 billion, or Meta $65 billion.
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Does America need the huge uptick in electricity generation that has fueled a run-up in utility stocks?
American tech companies are scrambling to respond. The Information reports that Meta has tasked several teams of engineers with closely examining DeepSeek to see how they can improve their company’s own Llama A.I. software.
Already, American A.I. providers are rushing to dissuade customers from switching to cheaper DeepSeek offerings. (One potential stumbling block for some is that DeepSeek, as a Chinese company, won’t answer questions on sensitive topics such as those involving China’s leader, Xi Jinping, though developers say that it’s easy to modify the software.)
Satya Nadella, Microsoft’s C.E.O., has a more positive take: More efficient and accessible A.I. might lead to a “Jevon’s paradox” moment: “As AI gets more efficient and accessible, we will see its use skyrocket, turning it into a commodity we just can’t get enough of,” he wrote on X.
What will policymakers do? President Trump and other Western leaders have been anxious to unveil steps to bolster their homegrown A.I. industries, both by helping them grow and imposing constraints on Chinese rivals. But DeepSeek suggests there are limits to that approach.
Expect tough questions from analysts this week, especially as four of the so-called Magnificent Seven tech giants, including Meta and Microsoft, report earnings this week.
HERE’S WHAT’S HAPPENING
Hearings for Trump cabinet picks and the Fed loom large this week. Senators are expected on Monday to approve Scott Bessent as Treasury secretary. On Wednesday, they will hold confirmation hearings for Howard Lutnick, President Trump’s choice for commerce secretary, and Robert F. Kennedy Jr., the candidate for health secretary. Also on Wednesday, it’s decision day for the Fed: Many on Wall Street expect the central bank, wary of inflation, will keep interest rates steady.
Bitcoin falls below $100,000 as the industry deals with a flood of memecoins. The sell-off coincides with the broad slump in tech stocks, and comes despite an executive order by Trump to bolster the sector. (Tokens tied to the president and the first lady, Melania Trump, have slumped sharply again, amid a wave of criticism.) Meanwhile, Brian Armstrong, the C.E.O. of Coinbase, who criticized regulations by the Biden administration, suggested that regulators should create a “block list” for new digital tokens as his company struggles to deal with the million new ones being created each week.
Trump says he’s making progress on a TikTok sale. The president said he was in talks with several potential buyers to take control of the video app as part of an arrangement with ByteDance, the platform’s Chinese owner, with a potential decision in the next 30 days.
Trump continues his attack on banks
President Trump’s jab at Brian Moynihan, Bank of America’s C.E.O., grabbed headlines at the World Economic Forum in Davos, Switzerland, when he accused the executive of “debanking” his conservative supporters.
What many haven’t noticed that Trump has kept up his attack since then.
When the president visited Los Angeles on Friday for a round table on the California wildfires, he doubled down on his criticism of Bank of America. “They’re not nice. Sounds very nice, ‘The Bank of America.’ They are not nice,” he told someone in attendance. But he didn’t stop there, adding, “We’re doing numbers on banks.”
Trump’s issues have expanded beyond debanking. The conversation in Los Angeles was about the profit margin that banks often capture by charging a significantly higher interest rate on loans to consumers than the banks pay to borrow from the Fed.
Might he try to force banks to lower interest rates? Or could he make good on a campaign promise of capping credit card interest rates? (It’s not clear if he has the authority to do so via executive order.)
Trump’s relationship with banks is complicated. Few on Wall Street and finance are in Trump’s inner circle, especially compared with tech moguls (some of whom are trying to disrupt banking). Howard Lutnick, Trump’s pick for commerce secretary, comes from the rough-and-tumble brokerage business than the polished worlds of investment banking and commercial lending.
By contrast, Jamie Dimon of JPMorgan Chase has a more nuanced relationship with the president. Though he privately supported Kamala Harris in the 2024 election, the JPMorgan chief has said that Trump wasn’t wrong on issues including taxes and immigration at last year’s Davos, and this year said he’d be on board with tariffs if they’re good for national security.
Also worth noting: One of Bank of America’s largest shareholders is Warren Buffett, who has clashed with Trump in the past. That said, Buffett didn’t weigh in on the election and has been selling down his Bank of America stake since before November.
Trump is taking shots at banks just as they were expecting a friendlier administration., The industry, whose members had been prevented from merging for years, was expecting a wave of consolidation under Trump.
But there have already been signs that banking won’t get what it wants. Trump’s pick for Treasury secretary, Scott Bessent, said in his confirmation hearing this month that the five largest banks had too much market share.
What to read into Trump’s Colombia showdown
President Trump’s standoff with Colombia over immigration lasted just a few hours and played out mostly on social media.
But the fallout will likely reverberate among global leaders.
The latest: President Gustavo Petro of Colombia backed down from his refusal to accept American military planes carrying deportees into the South American country. His decision came after Trump threatened sanctions and tariffs — starting at 25 percent, and then climbing — on the country’s exports, including crude oil, coffee and cut flowers.
Petro’s U-turn gives the White House a victory on multiple fronts. Trump can show he’s living up to his campaign promise to crack down on illegal immigration.
And he can put other foreign capitals on notice that he will use tariffs to extract conditions that go beyond trade. “Today’s events make clear to the world that America is respected again,” the White House declared in a statement.
Allies won’t be spared. Colombia has long had close diplomatic ties to the United States — as do other targets of potential tariffs, Canada and Mexico. Some Trump aides want to proceed with tariffs on the latter on Feb. 1, talks or no talks, The Wall Street Journal reports.
Last week, the S&P 500 rallied in part on hopes that Trump’s recent tariff comments, especially about China, signaled a softer policy approach. Was that all a mirage?
And then there’s Greenland. Trump has coveted the autonomous Danish island for its strategic location in Arctic shipping and defense and for its mineral wealth, and has suggested he’d be willing to use military force or economic coercion to annex it.
On Air Force One this weekend, Trump told reporters that he could wrest control of Greenland from Denmark. “I think we’re going to have it. I think the people want to be with us,” he said, referring to Greenlanders.
Trump’s comments add to heightened tensions between Washington and NATO allies. “The Danes are saying, ‘Keep it down,’ but they’re scared,” Zaki Laïdi, an adviser to the former E.U. foreign policy chief Josep Borrell Fontelles, told The Times.
Douglas Emhoff’s next gig
The latest guessing game on the Washington-to-New York Acela is where former Vice President Kamala Harris and her husband, Douglas Emhoff, might go next. We know the answer to half of that question.
Emhoff will become a partner at the corporate law firm Willkie Farr & Gallagher, splitting his time between Los Angeles and Manhattan. He starts on Monday, advising companies on crises including litigation and corporate investigations, DealBook’s Lauren Hirsch is first to report.
Emhoff spent decades as a corporate lawyer before moving to Washington. He co-founded a boutique law firm in 2000, which he sold to a rival, Venable, in 2006. He left Venable in 2017 for DLA Piper, and stepped away full-time in 2020, partly to avoid conflicts of interest entanglements once his wife became vice president.
His clients have included Spotify and Lionsgate. He’s also represented Willie Gault, the former Olympic sprinter and N.F.L. star, whom he represented in an S.E.C. fraud case.
Willkie will tap Emhoff’s experience from his legal career and the White House. The second gentleman has amassed a network of key figures in entertainment, private equity and the corporate world.
Emhoff was a visible presence during the presidential campaign, helping his wife raise more than $1 billion. He also represented the U.S. in a diplomatic capacity at events like the 2024 Olympics in Paris, and led the Biden administration’s efforts to combat antisemitism.
“That got him in touch with very important leaders across the globe,” Thomas Cerabino, a co-chairman at Willkie, told DealBook.
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