♪ >> welcome to "bloomberg markets." i'm scarlet fu the big story today, a chinese a.i. deepseek is gaining attention. that company's technology represents a lower cost challenge that calls into question other a.i. sector leaders including nvidia. first let's show you what is happening in equity markets. the s&p 500 down for a second day, losing 1.7%.

a lot of questions over the level of spending and energy required to build the u.s. a.i. industry. in particular focus here is the philadelphia semiconductor index down 9%. the biggest one-day drop since the pandemic, since 2020. nvidia which is down 15% isn't the biggest decliner. the 10-year yield moving lower. safe havens and the yen are falling below 4.5%. so yields have come back a little but here. and the yen is firm making the yen carry trade a lot less attractive today. the yen has further room to gain. but back the big story we're following right now. deepseek that has drawn global

attention after its chatbot app surged the top of smartphone download charts. and no question this is what is driving markets today. here's what guests on bloomberg have been saying about deepseek's a.i. >> there's no question that this could be a potential game changer. >> it's a game changer for the mag-7 stocks. >> tech has to be ok because it is such a large weight the market. and if it's not ok, the entire market goes. >> we're all tied to nvidia. >> china is not as far back as what people thought. they are much closer. >> they are a competitor that might catch the ire of the trump administration. >> this has got to be a core concern of not just the trump administration but all the tech universe that has moved into the west wing. >> the u.s.-china trade wars can get even more heated which will

bring more volatility to this market. scarlet: a lot of weakness the tech sec right now. let's bring in emily. >> you can really see the scale of how much panic has taken over markets this morning on that deepseek news and just how taken back investors were. looking at over 500 billion dollars in market cap being wiped out if these losses hold for the end of the day. broadcom also down. marvel technology, lamb research, all really just wiped out on concerns here that a chinese start-up could be really disrupting the a.i. business model. and that's also bleeding into the mag-7 names that have spent so much or at least deployed

plans to spend massive amounts of money on a.i. now really getting hit here. alphabet down 3%. amazon faring better. down 1% but still in the red. microsoft, that was a big spender here on openai. the question is if these mag-7 companies are spending on openai or they should be spending a faster model. and apple up 3%. not affected by those concerns but really, all in all, the mag-7 also investors nervous here because of the valuations we're so high already. and there is disruption. and finally, it's not just the tech sec that's really losing today but it's also the infrastructure that powers a.i. thinking data centers, power centers. those were all down. oracle down 12%.

now down over 25%, scarlet. scarlet: clearly a lot of red. thank you for highlighting all of those big movers. bloomberg's emily graffeo. so that brings us to the question. what exactly is deepseek? why is it moving markets so much today? why does it seem to be panicking investors? let's bring in rachel metz in san francisco who covers a.i. for bloomberg news. deepseek feels like it came out of nowhere. how long has there been something that has been percolating and worth paying attention to? >> this particular company and this particular model, i think for a lot of people did seem to come out of nowhere. the company habit existed for all that long. and some of the tactics that they're using, the way they built this model, it sound like what some of the biggest companies are doing to build their models right now. a lot of techniques are what people in the industry are

familiar. it's just the speed with which they built it and the low costs and the limited access they would have to the best chips on the market would make the performance that really astounding. these models have been so expensive to build. if somebody can build them quickly with less money and fewer of the high powered chips that a lot of the companies on the market like openai and anthropic and others from relying on, then you could see where that would make some investors a little freaked out. scarlet: it makes a difference if deepseek was able to build out this chatbot without access of the technology. is there any way that they manage to get to that technology regardless? rachel: i'm not sure. if you can build these systems in different ways, you need to

make your systems seem more efficient, it appears they may have come up with some ways to do that and let's keep in mind just because you have chips, doesn't mean you want fewer chips. having access to a lot of high powered chips is still going to be a game changer for these companies in many ways. you can't just train the model. you have to offer it to people and that also requires chips and computing power. scarlet: right. and racism, there was a -- rachel, this was a headline that deepseek is restricting new sign-up by people with a chinese telephone number. is this significant? rachel: if i recall quickly, there had been some sort of malicious activity that made them feel like they had to do that. so to be honest, we might have to wait to see what's going on there. they probably saw a huge surge in sign-ups over the last couple of days as their app in

particular skyrocketed on app surchallenge. scarlet: thank you for clarifying that. really appreciate you putting some headlines. at best, you're unclear but do draw attention to the fact that this is a indemand service. rachel, thank you. we're going to have more coverage on this because coming up, was the writing on the wall for today's tech route? dave lee join us with their take. this is bloomberg. this is bloomberg. ♪

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scarlet: this is "bloomberg markets." i'm scarlet fu. it's time now for the stock of the hour and we're looking at the entire nasdaq the qqq's, down today over the story that we've been following all morning after chinese start-up called deepseek launch ag product that rivals u.s. a.i. cot bot that appears to be a fraction of tell cost. a month ago, jade lee wrote wall street demands meaningful return on investment from a.i. will get louder. capital centers and semiconductor hoard willing skyrocket. but the capability won't match the pace of investment. for more on this, we're joined by dave lee and mear quasar.

was this a selloff looking for a cat dis? -- catalyst? >> already the sheer amounts of investment in a.i. have had investors worried about how they're going to recoup that, given this enormous raise to build outdate centers and get energy and all these kind of stuff. now we have a exert on improving on the efficiency and bringing down the cost a lot. so there's now these two force where is investors already worried about spending now have an reach saying hole on. why isn't silicon valley doing what they're doing in china? big question for the tech exons companies. scarlet: so was that is selloff looking for a catalyst and deepseek just happened to provide a convenient spark?

>> hi, scarlet. i think so. that's one way to think about it. and another way is when you look at these companies, the big tech companies that have had high valuations, the reason they have high valuations is that further out, there's more aggressive earnings growth. so if you look at the five-year earnings number of every company in the u.s. stock market, you would see that its valuation based on that forward earnings is the long-term average of 18 times. that's not reflecting all of the expectations that are in these stocks. but the flip side of that is when you have these high expectations, you're segment them up for let's say disappointment because a lot of these companies are not going to make them. something is going to come along and knock some of them off and in this case, it's deepseek. but it was probably going to be something. scarlet: it was probably going to be something. and dave, earning season is upon us. we're going to hear from a lot of the mag-7 names and there are

estimates that meta, microsoft, alphabet may commit more than $200 billion in execs this year. what -- cap pecks this year. it got a lot tougher for these executives, didn't it? >> yes, it did the justification for that spending has suddenly become much harder to make. they will try and make it and i don't see this altering the course of the a.i. research. but you are right. now when they go on these -- you're already seeing c.e.o.'s try to sort of tempt to some of that and for what it's worth, the idea of something was going shake confidence no matter what it was is very, very true. and one of the big lessons from this maybe that investors need to sort of keep cool as the nuances of a.i. development, you know, ebb and flow throughout the year. because we're going so have more moments where it seems like the american market is pulling

ahead. but that's going to be the big question for c.e.o.'s to answer this week. here's why we're spending. here's why we're staying on course. and i'm sure investors understand where that story is for their a.i. strategy. scarlet: is the u.s. capitalism story still intact or did deepseek poke a hole in it? >> that's such an interesting question to think about. i mean, it's probably too early to say. but it looks to me like it's taken at least a deep bruise and i think the question -- at least the thing that i'm interested in is what is the impact? you know, this market has been led by so-called high quality, high profitability stocks since the financial crisis. and all this time, it's been talk about why is it that the most obvious names on the stock market, microsoft, nvidia, google, etc., you know, everyone knows about them. everyone knows that they make a lot of money. if you could show up and buy them, why does that make any

sense in an efficient market? and deepseek is giving you an answer and the answer is there's really risk there and the risk is that when you have a highly profitable company, you attract competitors who are coming to take market share. and eventually somebody comes along and deepseek might be that competitor that we've been scratching our heads about for a long time in this big tech space. scarlet: and even if it isn't, it represents the potent that someone else could come along. dave, bloomberg intelligence wrote if anything, deepseek promised to do could open a new budget a.i. segment. so maybe this is something where nvidia still gain market share. is that another way to think about it to something bigger and broader? >> absolutely. one of the problems with united states even rudimentary things are being charged by openai. if that price comes way, way down, it's going to get cheaper. people are going to use it more often and for a wider range

applications that they perhaps wouldn't have done in the past. we've seen people mentioning the principle where the cheapest, the more phenom would end up consuming it. there's a lot of hope of this potential for that from deepseek. and to spite the shock that some of the companies have suffered today, the long term for a.i. is just more of it and more places. scarlet: more and less univariety than what we've seen so far. nir, we saw nasdaq futures tumble and at one point, it look like we're going to get this violent risk update. at midday, there's no indication that this is a get out of equity scenario. how long does this weakness last? >> well, i think we're in the process of finding out because people are looking at long term earnings and asking themselves what is the impact on this? one clue is when you look at where the action is today, you look at large value and large

growth in the u.s. the last time we look before we got on, the swing is about 400 -- 4% points with large growth down 3%. but large value up 1%. why? why shouldn't it be if we're going to narc down the earnings of large growth that we might be marking up the earnings of large value? and one answer to that question might be if a.i. becomes as cheap and as ubiquitous as this seems to suggest it might be, then it might not be contributed to only just the biggest companies in the u.s. stock market which has been our going assumption for a long time. maybe it now contributes to the temperatures power of more stocks. maybe that brings down the top part the marriage and that's what you're seeing today. whether that continues, i don't know. but that to me is the best read of why we're seeing that divergence. rachel: got it. really appreciate your joining us today for this roundtable.

coming up as china's a.i. deepseek sparks concern around tech, what does this all mean for nvidia specifically? it's lost about $565 billion from its market today this is bloomberg. ♪

scarlet: this is "bloomberg markets." i'm scarlet fu. we've got breaking news because wall street banks are within striking distance of off loading debt tied to x. and it has ties to a.i. what do we know? >> we are aware that google banks are finally trying to bring the x dead that's been sitting on their balance to the market to see if potential investors will take it on from them. that's a situation you normally face where banks start holding on to debt for such a long time. and despite some improved

earnings, it would be very hard at close to par. however, what we've heard is it's been shopped around in roughly 95 crepts to the dollar. yes, there's improved earnings in the social media business but one that's been dangling and could explain why there is more interest than normal is the fact that over the last couple of years, x, the social media platform, has gotten a stake in elon musk start-up. based on x a.i.'s last fundraising round which has $15 billion, we understand x's stake itself which has been undisclosed is worth about $6 billion and bankers are telling potential investors that they would have a claim on that stake. it would make it a little more appealing for investors to play in this name right now. scarlet: got it. and the banks we're talking about here, being led by bank of america, barclays. thank you so much. now we're going to stay with the a.i. theme. we're looking at nvidia.

plunging today. and went to bring in a longtime nvidia bull and early investor, founder and cio adam gold. what do you make of this news about deepseek and the questions it raises about nvidia and the prospects for nvidia? adam: thank you for having me today. certainly exciting. different day when you wake up because you never know what the day would be. i was told my job is to tie to put the puzzle pieces together and you think you do your job and you have a great thesis or story and earnings and then you come in and there is a new piece that you haven't put together or they're all mixed around. and so there's never an end to our job. we're focused on fundamentals long term horizon. and so i've ban shareholder since 2016 nvidia. so these are the timelines we try to invest our portfolios for clients. we had a period where the shares were performing exceptionally and there's periods where they will underperform.

so particularly on this news today, i think the question has been what the growth trajectory of the company will be in the future. that has been the question on every call in the last several quarters since there was real breakout in early 2023. something that people have never really seen before. and no one thought they could grow in 2024. there were real questions. and there are companies have the insights and say we do believe we will grow in 2024. we're looking at another 50% plus revenue growth year-over-year. and after doing over 100%. what happens next year? it's always the question of them and there's always a period of question and concern. they ramp their products every year. that's the catalyst which we appreciate, we like. that's something similar with apple when they have new phones. despite consumers being less excited each year, there's tough of an installed base that people will upgrade. there's a lot of imlayer is -- similarities with nvidia.

the heavy is the head that wears the crown. scarlet: so very quickly here. as the big tech companies get ready to report earnings, what will you be listening to try to assess the impact from nvidia from deepseek? adam: the questions is their large customers. they sell to the largest customers. we're still very early in cloud adoption. so you think about the capx, several days ago, less than week, we had the announcement of stargate which was a new entrant in this world and you had over companies saying they're going to spend more. if there's any question on the future spend, they do guide basically on an annual basis since we won't get any guidance on capx. all stocks are at discounting value. five year from now. this no answer for that. no one will have that answer. i do believe that there's a great phrase --

scarlet: yep. adam: the more you buy, the more you save. scarlet: yes adam, we need to leave it there. thank you so much. adam gold, the cio. that it for us. keep it right here. balance of power is up next. ♪ the way i approach work post fatherhood, has really trying to understand the generation that we're building devices for. here in the comcast family, we're building an integrated in-home wifi solution for millions of families like my own. in the average hseld, there are dozens of connected devices. connectivity is a big part of my boys' lives. it brings people together in meaningful ways.

>> from the world of politics to the world of business, this is "balance of power."

live from washington, d.c. joe: deepseek syncs the market and poses new questions about washington's approach to ai. welcome to the faster show in politics as we learn more about the chinese ai app that seem to have defined the odds when it comes to export controls and spending. i'm joe mathieu alongside kailey leinz in washington. waking up to a whole new headline after a doozy of a weekend coming from the trump white house. do you have deepseek on your phone? kailey: even if i wanted to, i wouldn't be able to use it now. chinese phone numbers right now only due to some breaches that deepseek says they have experienced over the last day or so. not great if you are a

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