Image Source: PexelsTech stocks bounced back vigorously on Tuesday, with the Nasdaq climbing 2%. Following the DeepSeek upheaval, traders scoured the remnants of Monday’s tumult for undervalued gems. Despite persistent concerns about overvaluation and potential turbulence due to “Trump’s tariff threats” and a seemingly indefinite Federal Reserve pause, AI stocks’ allure remains a compelling narrative.Navigating this sentiment-driven market is more challenging than ever. A vocal market segment has cautioned that tech valuations have been inflated and disconnected from tangible metrics since last year. Sentiment, however, is a fickle beast—it can propel markets to new heights until it abruptly doesn’t. The prevailing exuberance makes the market susceptible to sharp reversals, and the DeepSeek saga could still trigger a significant recalibration of tech ambitions.The tech sector’s resilience poses a crucial question: Is this rebound merely a brief respite before a more substantial downturn, or are investors merely digesting the ambiguous revelations surrounding DeepSeek’s innovations? With DeepSeek’s executives remaining silent during the Chinese Lunar New Year, the market ponders several unresolved issues—questions about the authenticity of DeepSeek’s low-cost AI model and its sustainability loom large. Amidst speculation and secrecy, the investment community remains on edge, wary of the potential and pitfalls that DeepSeek represents.Critics are casting doubt on DeepSeek’s claim that it has created an AI model on par with top-tier U.S. systems without using advanced GPUs. Considering the staggering costs associated with training premier AI models—rumoured to approach a billion dollars—the notion that DeepSeek did so for a mere five million seems far-fetched. While DeepSeek’s bold assertions are captivating, they don’t seem to disrupt the entrenched dynamics of computing that continuously demand more powerful GPUs. Thus, DeepSeek might not represent the revolutionary breakthrough it purports to be but merely another step in the rapid technological evolution, where innovations are quickly emulated and assimilated. This episode highlights the unyielding pace of change in the tech industry, where innovation is relentless, and the landscape is forever evolving.What a difference a day makes in the life of a capital markets trader.Yesterday, the market was in a tailspin, reacting as if DeepSeek’s disruptive, cost-effective AI model would cause a tech meltdown reminiscent of a Black Swan event. Yet today, the sentiment has shifted dramatically—the prevailing thought is that more affordable AI could accelerate the technology’s adoption, potentially benefiting the entire sector.This change in perspective was mirrored in the stock performance of major tech players. Nvidia, the AI Poster Child, which took a hit in Monday’s sell-off, rebounded impressively, closing the day up 8.8%.Meanwhile, the dollar strengthened on the back of President Trump’s comments about wanting to implement universal tariffs that would be “much bigger” than the initial 2.5%. For traders, the burning questions now are: How “much bigger” can these tariffs realistically get? And what concessions might be necessary from each affected country or region to potentially roll them back? The answers to these questions could redefine trade dynamics and affect market movements.More By This Author:Markets Tumble: DeepSeek Issues Monday Wake-Up Call To US Tech Sector
“U.S. Exceptionalism” Faces Its Sternest Test Of The Year
Tracking The Unpredictable Arc Of Trump’s Policy Manoeuvres—Much Like Keeping Our Eyes On A Bouncing Ball