The revelation of DeepSeek’s low-cost large language model (LLM) sent shockwaves through the US markets last night, causing semiconductor and related companies to be heavily sold off.
The biggest plunge in my portfolio is surprisingly not Nvidia Corp (NASDAQ: NVDA) but Arista Networks (NYSE: ANET), which plummeted by a staggering 22%!
Being the largest position, it significantly impacted my US portfolio, reversing this year’s robust start into a loss.
Despite that, I was nonchalant about it. While the stocks were free-falling last night, I was relaxing with Netflix (NASDAQ: NFLX) and rested well after that.
This can be primarily attributed to two reasons.
First, I took some profits off the table last December as I felt the US market was frothy. Hence, psychologically I have been mentally prepared for a market correction.
Second, my conservative approach towards my allocation means that Arista’s steep plunge last night resulted only a 2.5% drop in my portfolio and dented my net worth by a mere 1%.
What happened is a stark reminder that competitions, which are not always visible, lurk in the background. It is even more important for retail investors like us, who are not in the industries, to account for such risks.
Back to the threat on the reduced demand on AI chips and infrastructure due to DeepSeek and potentially more low-cost LLM.
My simplistic take is if AI is just about LLM and what’s being presently offered, then it makes sense that the demand will drop.
However, I will be disappointed if that’s the end point from the tech titans.
I would imagine that with the increasing computing power by Nvidia, we will be seeing more applications and usages, some that we can’t believe it’s possible now.
That should drive further technological advancements and the cycle repeats.
I will not be increasing my Arista position as it remains my second largest position.
I might consider adding more Nvidia though as I have a much smaller position. However, I am not in a hurry to add and will probably wait for the current situation to stabilise before making a decision.
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