Impressive results from China's low-cost DeepSeek AI model this week shaved roughly $1 trillion from U.S. tech stocks in the S&P 500. But so far, investors aren't betting against U.S. AI leaders.
↑ X NOW PLAYING Beating The Market: How To Find Outperforming StocksThe 10 U.S. tech stocks initially hit most on the DeepSeek news only have an average level of short selling of 1.7% of shares outstanding, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSurge. That's lower than the 2.6% of outstanding shares shorted in the entire S&P 500.
Why no panic yet?
"The competitive advantage in developing AI may well have moved from computing power (very capital intensive) to developing applications for a worldwide audience of users (requiring much less capital)," said Nicholas Colas of DataTrek Research. "This strikes us as a good thing for many U.S. Big Tech companies."
Short interest on Nvidia (NVDA) is just 1.17% of outstanding shares. It's that low despite DeepSeek being a direct threat to its giant AI business.
The AI-chip maker lost nearly $600 billion in market value on Monday — more than any other S&P 500 stock. A short would have been very lucrative in the short term, but frightening in the long term. Shares are up more than 111% in a year's time and sport an RS Rating of 90.
Additionally, analysts think the company will make $2.95 a share in 2025, up 127% from 2024.
The most highly shorted in the top 10 hurt tech stocks following the announcement is memory maker Micron Technology (MU). Nearly 4% of its shares outstanding are shorted. Micron's value took a $13.5 billion hit following the news.
It's unclear how serious the DeepSeek threat will ultimately be for U.S. AI firms. But for now, few investors are willing to try shorting these monster winners.
| Company | Ticker | Market Value Initially Lost ($ billions) | Short interest % |
|---|---|---|---|
| Nvidia | NVDA | -$592.6 | 1.17% |
| Broadcom | AVGO | -$199.5 | 1.2 |
| Oracle | ORCL | -$70.8 | 0.743 |
| Microsoft | MSFT | -$70.6 | 0.83 |
| Arista Networks | ANET | -$36.3 | 1.02 |
| Micron Technology | MU | -$13.5 | 3.84 |
| Advanced Micro Devices | AMD | -$12.7 | 3.63 |
| Cisco Systems | CSCO | -$12.5 | 1.29 |
| Amphenol | APH | -$11.6 | 1.13 |
| Applied Materials | AMAT | -$9.9 | 2.38 |
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