Nasdaq – Further Update

I was clearly mistaken this morning. The Nasdaq drop was primarily driven by news surrounding the Chinese startup DeepSeek.

DeepSeek has raised concerns within the US tech sector due to its development of open-source software that it claims rivals OpenAI’s latest model. What makes this particularly unsettling for some is their assertion that AI progress can be achieved without reliance on costly silicon chips or the dominance of major US tech companies.

Despite the dramatic market reaction—at one point, the Nasdaq fell as much as 5% today—I believe this is a significant overreaction. The emergence of another AI model is not about to undermine the investment case for companies like Nvidia, for example.

In my view, this reaction stems from broader market conditions. The Nasdaq has enjoyed a strong rally, up 20% over the past six months and doubling over the last two years. With a valuation of 27 times forward earnings compared to its historical average of 24 times, such upward momentum often leaves the market vulnerable to being shaken by sensational headlines. This, in turn, triggers questions about potential overvaluation.

That said, I don’t think this marks a moment of market recalibration. My expectation is for a relatively short-lived negative period before the Nasdaq regains its upward trajectory.

As such, I still believe an upward day trade remains a sensible move!