DeepSeek Outpaces ChatGPT, Global Markets React Sharply
On January 27, DeepSeek, a low-cost Chinese AI platform, surpassed ChatGPT on Apple’s App Store downloads, triggering a market sell-off. The rise in popularity questioned the need for significant spending to roll out AI products.
US tech giants Nvidia (NVDA) and Broadcom Inc. (AVGO) tumbled 16.97% and 17.40%, respectively. The crypto markets also succumbed to the news, with bitcoin (BTC) falling to a session low of $97,768 before rebounding.
US President Trump’s initial response to the market reaction was subdued, reportedly saying,
“The release of DeepSeek, AI from a Chinese company should be a wakeup call for our industries that we need to be laser-focused on competing to win.”
However, the administration may use tariffs as leverage to support Silicon Valley. How China handles Trump’s rhetoric could set the tone for 2025.
US-China Relations Crucial for Consumer Sentiment
Meanwhile, US-China relations may also influence China’s consumer sentiment. A US-China trade war could initially drive nationalist sentiment, boosting demand for domestic brands. Under this scenario, Beijing’s consumption-targeted stimulus measures may bolster China’s economy.
However, prolonged tariffs may undermine consumer confidence, curbing discretionary spending and impacting the economy. Under this scenario, consumption-targeted stimulus could become less effective, exposing China’s economy to the global demand environment.
Conversely, stable US-China relations could boost consumer spending, supporting China’s transition to a more consumption-driven economy. Near-term unemployment trends could be crucial. January’s NBS PMI data may fuel concerns about job security. However, the upcoming Caixin PMI data will give greater insights into private sector conditions.
