DeepSeek Exposes Market Risk Hiding in Plain Sight
The S&P 500 is too heavily weighted toward a few superstar innovation stocks. Now investors may do something about it.
A red shock.
Photographer: Yuki Iwamura/Bloomberg
The S&P 500 Index plummeted as much as 2.3% on Monday over DeepSeek, a Chinese artificial intelligence startup that developed a model competitive with the US’s very best — and, supposedly, on the cheap. Venture capitalist Marc Andreessen called it a “Sputnik moment,” a reference to the Russian satellite that set off the 1957-1960s Space Race. Chip companies plummeted and so did many of the communications giants developing AI tools of their own. But the ostensible pandemonium in the world’s biggest stock market was not as widespread as you might imagine, and it seemed to abate as the trading day wore on. With DeepSeek hype still largely indistinguishable from reality, the main lasting lesson may be that diversification still matters.
Consider the following factoids about Monday, the worst intraday selloff of 2025: