Jan 29, 2025, 12:00 AM
Jan 29, 2025, 12:00 AM

Rick Rieder seizes tech buying opportunity amid DeepSeek fallout

Highlights
  • The technology sector was shaken by concerns surrounding the announcement from Chinese AI lab DeepSeek about its new language model.
  • Rick Rieder from BlackRock identified the market decline as a buying opportunity and acquired stocks in various technology companies.
  • Rieder remains optimistic about the equity market's potential returns for 2025, despite cautioning investors about crowded market positions.
Story

On January 29, 2025, the technology sector faced significant volatility following a major announcement from DeepSeek, a Chinese artificial intelligence lab. DeepSeek revealed it had developed a free, open-sourced language model in just two months with a relatively low cost of under $6 million. This news shook the market, leading to a sharp decline in stocks of key players in the AI space, particularly Nvidia, which fell by 17% initially. Although Nvidia saw a partial recovery of 8.8% the following day, it remained under pressure during the Wednesday trading session. Rick Rieder, Chief Investment Officer of Global Fixed Income at BlackRock, viewed this market reaction as a healthy reevaluation of technology stocks, which had recently been trading at high multiples. He noted that the sell-off provided a unique buying opportunity, prompting him to acquire shares in software firms poised to benefit from cheaper and faster AI models. Rieder emphasized the need for investors to understand the fundamentals of the companies they invest in rather than merely following trends. Additionally, Rieder indicated that some hyperscalers in the cloud computing domain, which heavily invest in data center infrastructure, were among his purchases. Although he did not disclose specific stock names, this category typically includes giants like Amazon, Google, and Microsoft. Rieder also expressed interest in certain semiconductor companies that experienced sharp declines following the news but argued that this should not be viewed as an indictment on chip technology or supply chains. Instead, he suggested it raised crucial questions about the costs associated with developing compute power. Looking ahead, Rieder remains optimistic about the stock market's prospects for 2025, suggesting that equities could yield a return of around 15% for the year. However, he cautioned investors to be vigilant, noting the risk associated with crowded positions in several equity markets. The recent events serve as a reminder of the importance of careful selection in the tech sector, especially as it grapples with rapidly evolving competitive dynamics.

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