Summary
Global tech stocks plunged after the launch of DeepSeek, a low-cost AI model by Chinese startup DeepSeek, sparked investor concerns over the dominance and valuation of AI giants like Nvidia.
Nvidia shares fell 17%, wiping $593 billion in market value—the largest single-day loss for any company.
The selloff impacted chipmakers, AI firms, and datacenter companies globally.
Analysts view DeepSeek’s cost-efficient model as intensifying competition, potentially challenging U.S. tech dominance.
… Also bad for some people with 401ks and similar retirement funds.
A lot of of families unable to hire bespoke financial advice put their savings into traditionally safer index funds like the S&P500 which have been increasingly weighted towards those companies.
Those lost trillions of dollars of value represent a lot of lo “retail” that is to say, not particularly wealthy, investors. Also a fair number of pension funds are probably similarly exposed, think teachers, nurses etc.
If retirement is years away, this is barely going to be a blip on the radar. Outside of a full blown depression, the market will recover. Hell, even after a depression, the market will recover if given enough time. If you had your entire retirement invested in a single sector or company, you deserve to lose 17% of it overnight tbh.
They’ll bounce back.
Volatility has always been built into investing, including index funds.
If retirement is a long way away, then this is a non event. If retirement is close and your 401k was in a target date fund, you are heavily invested in bonds at this point, precisely to deal with this sort of situation.
If you are close to retirement, and heavily weighed to tech heavy indecies, then this will probably delay your retirement a few years. If you’re already retired and so invested, you may have a problem.
While I understand your point here, but a 10% drop amongst tech companies should not be a huge drop for a properly diversified 100% stock based global index fund.
A 10% drop in general is expected for index funds, that’s why you should have a long time horizon. If a drop of 50% is more than you can handle then the stock allocation should be lowered from 100% and bonds increased by the same amount. S&P500 is not enough diversification, not nearly enough. Funds that track MSCI ACWI is a lot better in terms of diversification, and diversification is the ONLY free meal in investing.
Oh, a 10% drop is not super concerning. It’s more “what happens next.” The magnificent 7 have gone through the roof in terms of valuation since 2022… should those come back to Earth abruptly, it’s not just tech bros who suffer.