DeepSeek's Disruption: A Shock to the AI Sector, Not the Broader Market

SmartReversals
01-29

DeepSeek, two observations:

The shock caused by DeepSeek has predominantly affected the sector rather than the broader market, which typically serves as a reliable indicator of the economic and stock market cycle's health.

1) The communications services sector, which has been one of the winners in this bullish market alongside the tech sector, not only avoided losses but also appreciated by 0.52% during Monday’s session, trading near historic highs. It seems well-positioned to benefit from lower prices in artificial intelligence.

2) The financial sector is one of the first to feel the impact when economic issues arise. Yet, on this Monday, it marked a new historic high.

Technically speaking, the $.SPX(.SPX)$ and $NASDAQ 100(NDX)$ have a lot of work to do to hold green today and to demonstrate a solid reversal if it happens, so a pullback/correction is more likely than a market crash.

$VanEck Semiconductor ETF(SMH)$ $Communication Services Select Sector SPDR Fund(XLC)$ $NVIDIA(NVDA)$

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