Market Decode: The new AI kid on the block

The latest player in the artificial intelligence (AI) space has rattled the tech sector, but the added competition may be positive news for investors, says the Chief Investment Office

SOME ARE CALLING IT DEEPSEEK “FRENZY.” The recent debut of China-based tech startup DeepSeek’s reportedly lower-cost, more efficient AI model led to a 3% decline in the tech-heavy Nasdaq index shortly after its announcement.1 It also sparked concerns by investors about the potential impact it could have on America’s dominance in the AI space.

“While those concerns are understandable, we see the DeepSeek news as part of an evolving AI story that will contain many surprises, disruptions and benefits,” says Chris Hyzy, Chief Investment Officer for Merrill and Bank of America Private Bank. In fact, Hyzy says, the generative AI movement is just the beginning in a larger tech evolution. Watch the video above for more on what this new competitor in the AI space might mean for the markets and investors.

For more on DeepSeek’s potential impact on the tech sector, read the February 3 Capital Market Outlook and tune in regularly to the CIO's Market Update audiocast series.

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1Reuters, “DeepSeek sparks AI stock selloff; Nvidia posts record market-cap loss,” January 27, 2025.

Important disclosures

The opinions expressed are as of 1/30/2025 and are subject to change.

Investing involves risk, including the possible loss of principal.

Past performance is no guarantee of future results.

Investments in a certain industry or sector may pose additional risk due to lack of diversification and sector concentration. 

The Chief Investment Office (CIO) provides thought leadership on wealth management, investment strategy and global markets; portfolio management solutions; due diligence; and solutions oversight and data analytics. CIO viewpoints are developed for Bank of America Private Bank, a division of Bank of America, N.A., (“Bank of America”) and Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S” or “Merrill”), a registered broker-dealer, registered investment adviser and a wholly owned subsidiary of Bank of America Corporation (“BofA Corp.”).

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