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DeepSeek Doesn’t Damage Case for Magnificent Seven Stocks

BY | ETF Database
02/04/2025 | 776 VIEWS
With Nvidia (NVDA) the most greatly impacted, the Magnificent Seven stocks were recently slammed. That’s because news broke that China AI company DeepSeek has made significant progress in AI. And it did so at a fraction of the cost domestic firms typically incur.Unnerving investors all the more was news that DeepSeek made those strides using antiquated semiconductors that are far cheaper than AI chips sold by Nvidia. Concerning headlines to be sure. And they weighed on ETFs  like the Invesco QQQ Trust (QQQ B+)) and the Invesco NASDAQ 100 ETF (QQQM B). Fortunately, the DeepSeek dip was brief and QQQ and QQQM subsequently bounced back. Those rebounds could prove credible. That’s because professional investors believe the DeepSeek news isn’t as damaging to the Magnificent Seven stocks as previously believed. In fact, many professional money managers believe it will be domestic policy, not DeepSeek, that charts the near-term course for the Mag 7. That could be a relief to investors holding QQQ and QQQM. That’s because the ETFs allocate significant percentages of their rosters to those stocks as well as other AI-related names.Pros Backing QQQ HoldingsA new survey by Bloomberg Markets Live Pulse confirms professional market participants are backing the biggest holdings in QQQ and QQQM despite the DeepSeek headlines. “Of the 260 respondents, 88% said the debut of the startup’s latest model — which wiped $784 billion from the S&P 500 on Monday — will have little to no impact on the shares of the US technology behemoths in coming weeks. Few are cutting their exposure to the S&P 500, an index dominated by the massive tech companies,” according to the survey. More than DeepSeek, the queried investors believe it will be domestic policy set forth by President Trump that will have a larger impact on the Mag 7 and related stocks. That could be a positive, because Trump has made clear that he wants the U.S. to be a hub of AI innovation. He even told domestic companies to up their games following the DeepSeek news. Another positive could be, if accurate, the notion that the DeepSeek-induced sell-off was a case of too much, too fast as it pertained to QQQ/QQQM holdings. “When asked how DeepSeek’s emergence would affect their investments, 63% of survey participants said they have no plans to change their exposure to the S&P 500. More than half said this week’s rout was overblown, given questions over how DeepSeek managed to release an AI model that it claims cost a fraction of what US industry leaders spent on theirs,” according to the Bloomberg survey. For more news, information, and analysis, visit the ETF Education Channel.

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