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- 👉 DeepSeek Shakes Market Ahead of Mag 7 Earnings
👉 DeepSeek Shakes Market Ahead of Mag 7 Earnings
Apple, Meta, Microsoft, Tesla
Austin Hankwitz
27 Jan
Welcome to your new week.
Yesterday, most of the holdings in your portfolio likely saw some serious movement to the downside. Bitcoin dropped below $98K, alt coins dropped even more substantially, stock market futures sank, and much more. At the time of writing this — Nvidia (NVDA) shares have fallen -12% in premarket trading as well.
The VIX (AKA “The Fear Index”) was up as much as +44% this morning.
So what happened?
Concerns quickly soared due to apparent competitiveness in AI triggered by Chinese startup DeepSeek. They launched a free, open-source large-language model in December — and the whole market is now worried about it…
DeepSeek claims the model was developed in just two months for under $6 million, raising questions about the massive investments U.S. tech firms have made / are making in AI development. The news led to a global sell-off in tech stocks.
Analysts noted that while DeepSeek’s advancements are impressive, U.S. tech giants still have the advantage of access to advanced chips like Nvidia’s GPUs, critical for training large AI models. Some analysts remain skeptical of DeepSeek’s reported costs, suggesting they may not account for prior research, development expenses, or subsidies from the Chinese government.
Keep in mind… the source above is DeepSeek themselves.
What’s the takeaway?
Despite the sell-off, we’d like to caution you about being too fearful. This whole situation is raising question marks about the superiority of America’s AI infrastructure. However — we are being shaken by one startup’s word versus all of Big Tech.
We have no idea what the next news will be regarding this situation. All we know is that we’re not going to let one random Chinese startup convince us that the “AI bubble is bursting” without full information.
As you’ll see more of below — this is a MASSIVE week in the market for Big Tech earnings, and CAPEX will certainly be a major talking point in the earnings calls!
My hunch…. this will be looked back at as a great opportunity to have DCA’d in our portfolios!
Key Earnings Announcements:
Huge week of earnings ahead with 4 of the Mag 7 set to report — Apple, Meta, Microsoft, & Tesla
Monday (1/27): AT&T, Brown & Brown, Nucor, Sofi
Tuesday (1/28): Boeing, Chubb, General Motors, JetBlue, Lockheed Martin, Logitech, Raytheon Technologies, SAP, Starbucks, Sysco
Wednesday (1/29): ADP, ASML, General Dynamics, IBM, Lam Research, Meta, Microsoft, Progressive, ServiceNow, Tesla
Thursday (1/30): Apple, Blackstone, Caterpillar, Comcast, Intel, Mastercard, Nokia, Southwest, UPS, Visa
Friday (1/31): AbbVie, Brookfield, Charter, Chevron, ExxonMobil
What We’re Watching:
Meta (META)
Meta reports earnings this Wednesday with all eyes on its bold AI-driven strategy. The company has committed over $60 billion in AI investments for 2025 — aiming to scale its infrastructure to 1.3 million GPUs by year-end (x2 from 2024) — $30 billion of which is solely for GPUs.
Meta’s leadership in virtual reality (VR), augmented reality (AR), and the Metaverse complements its AI initiatives. However, the payoff for these investments remains uncertain, as Meta has warned of delayed returns amidst fierce competition. While its massive social media platforms and open-source AI strategy could boost user engagement, questions linger about whether the ad revenue will justify such colossal spending.
Investors will look for updates on AI infrastructure spending and its ripple effects on suppliers like NVIDIA, Taiwan Semiconductor, and Arista Networks. I look forward to Meta’s earnings call this week as it could set a great tone for its long-term growth narrative.
Meta Platforms, Inc. (META) Stock Performance, 5-Year Chart, Seeking Alpha
Microsoft (MSFT)
Microsoft reports earnings this Wednesday — with focus on its AI and cloud computing momentum under Satya Nadella’s leadership. The company’s strategic capital allocation — highlighted by its $13 billion investment in OpenAI, and $80 billion in project ‘Stargate’ — has positioned Microsoft as a key AI leader. AI services added 12 percentage points to Azure's growth in Q1 FY2025, with annual recurring revenue from AI expected to reach $10 billion by Q2 FY2025.
However, near-term growth in Azure may face moderation due to data center capacity constraints. To address this, Microsoft’s CAPEX is expected to exceed the $20 billion reported in Q1 — reinforcing AI and cloud leadership.
The ongoing integration of Activision Blizzard will likely weigh on Q2 earnings — operating losses from restructuring and severance costs offsetting the $2 billion in additional revenue generated by the acquisition. Long term, this deal enhances Microsoft’s push into cloud gaming through its Azure platform and Activision’s extensive game portfolio.
Microsoft’s long-term vision remains centered on AI and cloud dominance.
Microsoft Corp. (MSFT) Stock Performance, 5-Year Chart, Seeking Alpha
Investor Events / Global Affairs:
Big Tech earnings linger, the Chinese New Year comes at an interesting time, tax season officially begins, and Colombian tariffs.
Mag 7 Earnings Coming Under the Microscope
The S&P 500 is poised for its most substantial earnings growth since 2021 — anticipating a +11.7% increase in fourth-quarter profits. The largest portion of this surge is attributed to the "Magnificent Seven" tech giants — Tesla (TSLA), Meta (META), Microsoft (MSFT), Apple (AAPL), Amazon (AMZN), Alphabet (GOOG), and Nvidia (NVDA).
These tech leaders are projected to post +21.7% earnings growth for the quarter — outpacing the +9.7% expected for the remaining S&P 500 companies. However, the gap is projected to shrink in 2025, as broader market sectors catch up and equity returns begin to rebalance.
“Within the S&P 500, 36 companies reported earnings last week, with a sizable number being financials. 80% of S&P 500 firms reported better-than-expected earnings for the quarter. This week marks the second busiest of the fourth-quarter earnings season, with 104 S&P 500 companies scheduled to report. And most crucially, four of the Magnificent 7 report earnings this week.”
Chinese New Year
Source: Newsweek
As U.S. tech stocks fall and Chinese tech stocks rise — trading activity across major Asian markets is mostly closed due to the Chinese New Year. Exchanges in Hong Kong, Shanghai, Shenzhen, and Taiwan are closed for varying durations during the week-long holiday.
With Asia largely offline, it’s an interesting time for the DeepSeek news to be hitting the U.S. markets. Additionally, any unexpected trade or tariff updates from President Trump during this time could result in market responses to Asian markets coming more from the United States than China — considering Asian markets will be quiet.
Hang Sang Index (HSI), 5-Year Performance, Seeking Alpha
Besides the holiday — China’s factory activity unexpectedly contracted in January with a PMI of 49.1, though industrial profits rose +11% in December compared to the previous year. Meanwhile, China introduced new measures to boost equity and bond ETFs, aiming to support its struggling stock market.
In summary — this a crazy time for the DeepSeek news to rock the markets. The whole world has been focusing on Big Tech earnings that are starting this week. Asian markets are mostly offline due to the holiday. Meanwhile — everyone will be searching for answers this week…
Tax Season Officially Begins Today
Source: Forbes
Tax season begins today (Monday), with the IRS officially accepting tax returns. Refunds typically take less than three weeks for electronic filings with direct deposit, while mailed paper returns may take six to eight weeks. Many Americans depend on their tax refunds to make ends meet, with a recent survey finding 45% of those relying on refunds citing the rising cost of living as a key factor.
To track a refund, taxpayers can use the IRS website by providing their Social Security or ITIN, filing status, and exact refund amount. The IRS updates refund information daily, and once marked as sent, it may take five days for direct deposits to appear or several weeks for mailed checks. Refunds could be delayed if the IRS identifies issues requiring additional review or information.
If you’re a small business owner — don’t forget that this Friday is your deadline to file you Form 1099s to the IRS as well!
If you paid contractors in 2024, make sure you do this!
Trump Pauses on Colombian Tariffs
Source: Rolling Stone
President Donald Trump initially threatened a 25% tariff on Colombian goods but reversed the decision after reaching a deal on migrant deportations, shaking global markets briefly. The agreement included Colombia accepting deportees on U.S. military aircraft, resolving a dispute where Colombia had rejected such flights over concerns about detainee treatment.
Trump’s swift tariff threats, though reversed, highlighted his use of economic tools to enforce geopolitical goals, leaving global investors uneasy. The rapid diplomatic resolution signaled a fragile understanding, but Trump’s approach strained U.S.-Colombia relations, already tense due to differing political views. Colombia pledged to maintain dignified conditions for deportees while seeking to strengthen ties through further dialogue in Washington. Despite the temporary resolution, Trump’s tactics showcased his readiness to target even longstanding allies over policy disagreements, particularly on migration.
“Colombia is seeking to improve ties, with Murillo saying he plans to travel to Washington alongside the Colombian ambassador to the US in the coming days to follow up on the agreements between both countries. Still, Trump’s move sends a powerful message to the world, that not even old political allies are safe if they do not cooperate with him.”
— Shawn Donnan, Derek Wallbank, & Eric Martin, Bloomberg
Major Economic Events:
First Fed meeting of 2025 & the Fed’s preferred inflation gauge highlight this week.
Monday (1/27): New Home Sales
Tuesday (1/28): Consumer Confidence, Durable-Goods Orders, S&P Case-Shiller Home Price Index (20 Cities)
Wednesday (1/29): Advanced Retail Inventories, Advanced U.S. Trade Balance in Goods, Advanced Wholesale Inventories, FOMC Interest Rate Decision, Fed Chair Powell Press Conference
Thursday (1/30): GDP, Initial Jobless Claims, Pending Home Sales
Friday (1/31): Chicago Business Barometer (PMI), Core PCE, Employment Cost Index, Fed Gov. Bowman Speaks, PCE Index, Personal Income, Personal Spending
What We’re Watching:
FOMC Interest Rate Decision
Source: Federal Open Market Committee (FOMC)
The Federal Reserve releases its latest policy decision Wednesday at 2:00 p.m. ET, followed by Chair Jerome Powell's press conference at 2:30 p.m. ET, which is expected to drive market volatility.
Markets anticipate the Fed will maintain the current fed funds rate at 4.25%-4.50%, signaling a pause in rate cuts as inflation remains above the 2% target. Despite earlier moves to reduce rates in response to slowing inflation and labor market concerns, the Fed appears set to stay patient until clearer progress is made.
JPMorgan's Michael Feroli predicts a more cautious tone from Powell, describing the press conference as a "duck and cover" moment, with limited new insights on future rate paths.
“The Fed is tasked with the balancing act of using monetary policy to keep the economy hot enough that everyone has a job but not so hot that inflation spikes. Eventually, the Fed aims to reduce its interest rate to a "neutral" level where borrowing costs are neither hold back the economy nor artificially boost it.”
Personal Consumption Expenditures (PCE) Index
Source: Federal Open Market Committee (FOMC)
Friday brings a pivotal update on inflation with the release of December's PCE index. Economists anticipate "core" PCE inflation — excluding food and energy — to be 2.8%, mirroring November's rate. M/M projections suggest a +0.2% uptick – slightly faster than the prior +0.1%.
With this data arriving at the end of the week, it may overshadow insights from Powell's Wednesday press conference. Market focus could quickly pivot toward how these inflation trends, combined with external economic policies, shape the Fed's next steps in its fight against price pressures.
“Sticky inflation appeared to be a little less stuck this morning… The Fed’s preferred inflation gauge came in lower than expected, which may take some of the sting out of the market’s disappointment with the Fed’s interest rate announcement on Wednesday.”
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