Business
DeepSeek Prompts a Reckoning Across Wall Street and Silicon Valley
Good morning on this action-packed Monday. Mark this week on your “History of Artificial Intelligence Timeline”: The creation of DeepSeek, the Chinese A.I. sensation that we told you about last week, is shaking the technology industry to its core.
The super-efficient, open-source software is raising questions about the valuations of tech giants, including the chip maker Nvidia, with their stocks getting crushed today. Has the entire industry been wildly overspending? It’s also raising profound questions about how China may have undercut America’s most critical economic advantage on A.I. by making its technology free. We have more on all of this below.
Plus: Wall Street should pay attention to comments President Trump made late Friday that have flown under the radar.
The DeepSeek effect
Markets are on edge on Monday, as global tech investors face a $1 trillion wipeout. The cause: anxiety that the emergence of powerful — and cheap — Chinese artificial intelligence software could upend the economics of A.I.
Nasdaq futures have plummeted nearly 4 percent. And shares in Nvidia, the chipmaker whose processors help train and run A.I. software, are down 11 percent in premarket trading. Those in Constellation Energy, a utility betting heavily on powering A.I. data centers, are down nearly 13 percent.
Meanwhile, tech executives and policymakers have been left to wonder how strong America’s lead in A.I. is.
DeepSeek is forcing a reckoning in Silicon Valley. The company’s models appear to rival those from OpenAI, Google and Meta, despite the U.S. government’s efforts to limit China’s access to leading-edge A.I. technology. And DeepSeek says it did all this with a fraction of the resources that American competitors use.
Over the weekend, DeepSeek shot to the top of Apple’s App Store charts, rivaling ChatGPT. And DeepSeek is drastically undercutting OpenAI on price.
That raises a number of questions:
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Do leading A.I. companies like Google, Meta and the privately held OpenAI and Anthropic deserve their astronomical valuations?
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Do companies need to spend hundreds of billions on vast data centers powered by hugely expensive chips from Nvidia and others? Consider that OpenAI and its partners have promised to spend at least $100 billion on their Stargate project, or that Microsoft said it will spend $80 billion, or Meta $65 billion.
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Does America need the huge uptick in electricity generation that has fueled a run-up in utility stocks?
American tech companies are scrambling to respond. The Information reports that Meta has tasked several teams of engineers with closely examining DeepSeek to see how they can improve their company’s own Llama A.I. software.
Already, American A.I. providers are rushing to dissuade customers from switching to cheaper DeepSeek offerings. (One potential stumbling block for some is that DeepSeek, as a Chinese company, won’t answer questions on sensitive topics such as those involving China’s leader, Xi Jinping, though developers say that it’s easy to modify the software.)
Satya Nadella, Microsoft’s C.E.O., has a more positive take: More efficient and accessible A.I. might lead to a “Jevon’s paradox” moment: “As AI gets more efficient and accessible, we will see its use skyrocket, turning it into a commodity we just can’t get enough of,” he wrote on X.
What will policymakers do? President Trump and other Western leaders have been anxious to unveil steps to bolster their homegrown A.I. industries, both by helping them grow and imposing constraints on Chinese rivals. But DeepSeek suggests there are limits to that approach.
Expect tough questions from analysts this week, especially as four of the so-called Magnificent Seven tech giants, including Meta and Microsoft, report earnings this week.
HERE’S WHAT’S HAPPENING
Hearings for Trump cabinet picks and the Fed loom large this week. Senators are expected on Monday to approve Scott Bessent as Treasury secretary. On Wednesday, they will hold confirmation hearings for Howard Lutnick, President Trump’s choice for commerce secretary, and Robert F. Kennedy Jr., the candidate for health secretary. Also on Wednesday, it’s decision day for the Fed: Many on Wall Street expect the central bank, wary of inflation, will keep interest rates steady.
Bitcoin falls below $100,000 as the industry deals with a flood of memecoins. The sell-off coincides with the broad slump in tech stocks, and comes despite an executive order by Trump to bolster the sector. (Tokens tied to the president and the first lady, Melania Trump, have slumped sharply again, amid a wave of criticism.) Meanwhile, Brian Armstrong, the C.E.O. of Coinbase, who criticized regulations by the Biden administration, suggested that regulators should create a “block list” for new digital tokens as his company struggles to deal with the million new ones being created each week.
Trump says he’s making progress on a TikTok sale. The president said he was in talks with several potential buyers to take control of the video app as part of an arrangement with ByteDance, the platform’s Chinese owner, with a potential decision in the next 30 days.
Trump continues his attack on banks
President Trump’s jab at Brian Moynihan, Bank of America’s C.E.O., grabbed headlines at the World Economic Forum in Davos, Switzerland, when he accused the executive of “debanking” his conservative supporters.
What many haven’t noticed that Trump has kept up his attack since then.
When the president visited Los Angeles on Friday for a round table on the California wildfires, he doubled down on his criticism of Bank of America. “They’re not nice. Sounds very nice, ‘The Bank of America.’ They are not nice,” he told someone in attendance. But he didn’t stop there, adding, “We’re doing numbers on banks.”
Trump’s issues have expanded beyond debanking. The conversation in Los Angeles was about the profit margin that banks often capture by charging a significantly higher interest rate on loans to consumers than the banks pay to borrow from the Fed.
Might he try to force banks to lower interest rates? Or could he make good on a campaign promise of capping credit card interest rates? (It’s not clear if he has the authority to do so via executive order.)
Trump’s relationship with banks is complicated. Few on Wall Street and finance are in Trump’s inner circle, especially compared with tech moguls (some of whom are trying to disrupt banking). Howard Lutnick, Trump’s pick for commerce secretary, comes from the rough-and-tumble brokerage business than the polished worlds of investment banking and commercial lending.
By contrast, Jamie Dimon of JPMorgan Chase has a more nuanced relationship with the president. Though he privately supported Kamala Harris in the 2024 election, the JPMorgan chief has said that Trump wasn’t wrong on issues including taxes and immigration at last year’s Davos, and this year said he’d be on board with tariffs if they’re good for national security.
Also worth noting: One of Bank of America’s largest shareholders is Warren Buffett, who has clashed with Trump in the past. That said, Buffett didn’t weigh in on the election and has been selling down his Bank of America stake since before November.
Trump is taking shots at banks just as they were expecting a friendlier administration., The industry, whose members had been prevented from merging for years, was expecting a wave of consolidation under Trump.
But there have already been signs that banking won’t get what it wants. Trump’s pick for Treasury secretary, Scott Bessent, said in his confirmation hearing this month that the five largest banks had too much market share.
What to read into Trump’s Colombia showdown
President Trump’s standoff with Colombia over immigration lasted just a few hours and played out mostly on social media.
But the fallout will likely reverberate among global leaders.
The latest: President Gustavo Petro of Colombia backed down from his refusal to accept American military planes carrying deportees into the South American country. His decision came after Trump threatened sanctions and tariffs — starting at 25 percent, and then climbing — on the country’s exports, including crude oil, coffee and cut flowers.
Petro’s U-turn gives the White House a victory on multiple fronts. Trump can show he’s living up to his campaign promise to crack down on illegal immigration.
And he can put other foreign capitals on notice that he will use tariffs to extract conditions that go beyond trade. “Today’s events make clear to the world that America is respected again,” the White House declared in a statement.
Allies won’t be spared. Colombia has long had close diplomatic ties to the United States — as do other targets of potential tariffs, Canada and Mexico. Some Trump aides want to proceed with tariffs on the latter on Feb. 1, talks or no talks, The Wall Street Journal reports.
Last week, the S&P 500 rallied in part on hopes that Trump’s recent tariff comments, especially about China, signaled a softer policy approach. Was that all a mirage?
And then there’s Greenland. Trump has coveted the autonomous Danish island for its strategic location in Arctic shipping and defense and for its mineral wealth, and has suggested he’d be willing to use military force or economic coercion to annex it.
On Air Force One this weekend, Trump told reporters that he could wrest control of Greenland from Denmark. “I think we’re going to have it. I think the people want to be with us,” he said, referring to Greenlanders.
Trump’s comments add to heightened tensions between Washington and NATO allies. “The Danes are saying, ‘Keep it down,’ but they’re scared,” Zaki Laïdi, an adviser to the former E.U. foreign policy chief Josep Borrell Fontelles, told The Times.
Douglas Emhoff’s next gig
The latest guessing game on the Washington-to-New York Acela is where former Vice President Kamala Harris and her husband, Douglas Emhoff, might go next. We know the answer to half of that question.
Emhoff will become a partner at the corporate law firm Willkie Farr & Gallagher, splitting his time between Los Angeles and Manhattan. He starts on Monday, advising companies on crises including litigation and corporate investigations, DealBook’s Lauren Hirsch is first to report.
Emhoff spent decades as a corporate lawyer before moving to Washington. He co-founded a boutique law firm in 2000, which he sold to a rival, Venable, in 2006. He left Venable in 2017 for DLA Piper, and stepped away full-time in 2020, partly to avoid conflicts of interest entanglements once his wife became vice president.
His clients have included Spotify and Lionsgate. He’s also represented Willie Gault, the former Olympic sprinter and N.F.L. star, whom he represented in an S.E.C. fraud case.
Willkie will tap Emhoff’s experience from his legal career and the White House. The second gentleman has amassed a network of key figures in entertainment, private equity and the corporate world.
Emhoff was a visible presence during the presidential campaign, helping his wife raise more than $1 billion. He also represented the U.S. in a diplomatic capacity at events like the 2024 Olympics in Paris, and led the Biden administration’s efforts to combat antisemitism.
“That got him in touch with very important leaders across the globe,” Thomas Cerabino, a co-chairman at Willkie, told DealBook.
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China’s exports and imports each set monthly records in April, further cementing the country as the world’s leading trading nation as Beijing prepares to welcome President Trump for a summit next week with Xi Jinping, China’s leader.
China also ran a trade surplus — the excess of exports over imports — of $84.8 billion last month, according to data released on Saturday by the General Administration of Customs. However, that surplus did not set a record. The war in Iran and closure of the Strait of Hormuz pushed up the cost of imported oil and natural gas, causing China’s overall imports to increase slightly faster than exports.
The surplus in April keeps China on track for a third year of roughly trillion-dollar trade surpluses. China posted a $1.19 trillion trade surplus last year, easily breaking the world record of $992 billion that it had set the year before.
Mr. Trump is expected to press Mr. Xi to buy more American goods during their scheduled summit, part of his long-running effort to narrow China’s longtime trade surplus with the United States. But two recent court decisions overturning Mr. Trump’s tariffs on imports have eroded some of his leverage.
China’s exports to the United States jumped 11.3 percent last month compared to its shipments in April of last year, when President Trump’s “Liberation Day” tariffs produced a slump in imports from China.
The country’s imports from the United States rose only 9 percent in April this year. As a result, its trade surplus with the United States widened by 13 percent.
China has long used state-run purchasing collectives in big categories like farm goods and commercial aircraft to manage its trade with the United States, ensuring it sells three to five times as much as it buys. Mr. Trump and his advisers have criticized that imbalance.
Semiconductor exports doubled last month compared with April of last year. Chinese manufacturers cashed in on the artificial intelligence data center boom even though they cannot yet produce some of the fastest kinds of chips.
Overall exports of electronics and machinery were up 20 percent in April from a year earlier.
China acts in many ways as a shock absorber in global oil markets. Beijing buys more oil for its vast reserves when the price is low, then cuts back purchases when prices are high, as they were last month.
With oil prices spiking upward this spring, the tonnage of China’s oil imports dropped last month to its lowest level since July 2022, when Shanghai’s two-month Covid lockdown reduced demand. The lockdown hurt many of China’s oil-dependent industries.
Because prices rose faster last month than the tonnage declined, China’s overall bill for crude oil imports rose 13 percent from a year earlier. Rising oil prices helped drive China’s overall imports up 25.3 percent in April from a year ago, to a record $274.6 billion. Its exports surged 14.1 percent last month from a year earlier, to a record $359.4 billion.
China has been particularly successful this year in exporting electric cars as well as renewable energy products like wind turbines and solar panels. Exports of electric vehicles were up 52.8 percent last month from a year earlier.
China has been running large, and widening, trade surpluses over the past several years with most of the rest of the world. It has trade deficits with only a handful of countries, including those like Brazil and Australia which have very large commodity exports.
The European Union and many developing countries now find themselves with rapidly growing trade deficits with China. Practically all of them have run their own trade surpluses with the United States to fund their deficits with China, sometimes repackaging goods from China and shipping them on to the United States to do so.
China’s huge trade surpluses are not necessarily a sign of economic strength. They partly reflect very weak spending by Chinese households on imports and domestic goods alike after five years of sliding housing prices wiped out much of the savings of the middle class. This has prompted many families to scrimp on purchases like new cars, leaving Chinese automakers with more cars to export.
“The Chinese economy still demonstrates resilience in trade and industrial supply chains,” said Zhu Tian, an economics professor at the China Europe International Business School in Shanghai, after the release of the trade data.
But weak domestic spending and a leveling off in the trade surplus, he said, “suggest that economic growth will continue to face significant challenges for the rest of the year.”
Walt Disney Co.’s ABC is forcefully resisting Federal Communications Commission efforts to soften the network’s programming, accusing the federal agency of an overreach that violates 1st Amendment freedoms.
Last week, the FCC took the unusual step of calling in the licenses of eight Disney-owned television stations for early review. The move — widely interpreted as an effort to chill the network’s speech — came a day after President Trump demanded that ABC fire late-night host Jimmy Kimmel over a joke about First Lady Melania Trump.
The FCC separately has taken aim at ABC’s daytime discussion show, “The View,” which delves deeply into politics.
The FCC has questioned whether the show, which prominently features Trump critics Whoopi Goldberg and Joy Behar, could continue toclaim an exemption to rules that require broadcasters to provide equal time for opponents of political candidates.
In its response this week to the FCC, Disney’s Houston television station raised the stakes in “The View” dispute, calling the commission’s actions “unprecedented” and “beyond the Commission’s authority.” The ABC station’s petition for a declaratory ruling said “The View,” has long qualified as a “bona fide” news interview program with freedom to conduct interviews of legally qualified political candidates.
“The Commission’s actions threaten to upend decades of settled law and practice and chill critical protected speech, both with respect to The View and more broadly,” the Houston station KTRK-TV said in the filing.
The network’s firm stance sets up a clash with the Trump administration, including the president’s hand-picked FCC Chairman Brendan Carr, who has made no secret of his disdain for Kimmel and other ABC programming. Earlier this year, Carr announced that decades-old exemptions from the so-called “equal time rule,” for some programs, including “The View,” were no longer valid.
In a statement, the FCC said it would “review Disney’s assertion that ‘The View’ is a ‘bona fide news program’ and thus exempt from the political equal time rules,” according to a spokesperson.
“Decades ago, Congress passed a law that generally prohibits broadcast television programs from putting a thumb on the scale in favor of one political candidate over another,” the spokesperson said. “The equal time law encourages more speech and empowers voters to decide the outcome of elections.”
ABC’s strenuous arguments mark a turning point for the Disney-owned outlet.
In December 2024, a month after Trump was elected to a second term, the network quickly settled a lawsuit over statements made by news anchor George Stephanopoulos that Trump found offensive. ABC agreed to pay Trump $15 million to end his legal fight — sparking an outcry among free speech advocates, who accused the network of caving on a case it may have won.
But, over the past year, the network has weathered several storms, including a threat by Carr in September to punish ABC if it didn’t muzzle Kimmel for comments he made in the wake of conservative activist Charlie Kirk’s death. ABC briefly benched Kimmel to allow tensions to cool but, during the week his show was off the air, protesters loudly bashed Disney, demanding the legendary company stand up for free speech.
Thousands of consumers canceled their Disney+ and Hulu subscriptions in protest.
Protesters swarmed Hollywood Boulevard, protesting ABC’s move to bench Jimmy Kimmel in September over comments he made about the shooting of right-wing influencer Charlie Kirk.
(Genaro Molina/Los Angeles Times)
Some conservatives, including Sen. Ted Cruz (R-Texas) and commentator Ben Shapiro also criticized Carr’s handling of 1st Amendment issues.
“The days of the FCC as a paper tiger are numbered,” the FCC’s lone Democrat, Anna M. Gomez, said Friday in a statement. “What the public will remember is who complied in advance and who fought back. I’m glad Disney is choosing courage over capitulation.”
The high-profile dispute presents an early challenge for Disney Chief Executive Josh D’Amaro, who succeeded longtime chief Bob Iger in March.
ABC has asked for the full commission — a three member panel of Carr, Gomez and Commissioner Olivia Trusty, a Republican — to rule on the equal time exemption for “The View.” ABC said that, in 2002, it received a ruling from the FCC that granted the exemption, and the show’s format has not changed. “The View” is produced by ABC News.
“Some may dislike certain — or even most — of the viewpoints expressed on The View or similar shows,” the station said in its filing. “Such dislike, however, cannot justify using regulatory processes to restrict those views.”
ABC described a logistical nightmare of providing equal time for political opponents by pointing to California’s crowded primary field of gubernatorial candidates. “Affording equal time would mean accommodating over 60 legally qualified candidates, regardless of their perceived newsworthiness,” the station wrote.
The network said it makes show bookings based on newsworthiness, not partisan politics. It also noted it has invited politicians from both sides of the aisle to appear on “The View,” but some, including Vice President J.D. Vance, Health Secretary Robert F. Kennedy, Jr., Secretary of State Marco Rubio and entrepreneur Elon Musk, have declined the invitation.
The station also noted that, while the FCC has questioned the exemption for “The View,” the agency hasn’t shown interest in regulating programs on other networks, “including the many voices — conservative and liberal — on broadcast radio.” The FCC also oversees radio station licenses.
“The danger is that the government will simply decide which perspectives to regulate and which to leave undisturbed,” ABC said.
On April 28, Carr called for a review of Disney’s broadcast licenses, including for the Houston station and KABC-TV in Los Angeles, two years before any of them were set to expire. The FCC said the review was part of the agency’s year-old inquiry into Disney’s diversity, equity and inclusion policies and whether they violated federal anti-discrimination rules.
In its Thursday petition, ABC said it had fully complied with the FCC’s request for documents related to its diversity and hiring.
The company has produced more than 11,000 pages of documents to comply with the request, Disney said.
The same week that Disney sent documents to the FCC, Kimmel made a joke on his show about Melania Trump, comparing her glow to that of “an expectant widow.” On April 25, a gunman tried to breach security at the Washington Hilton, where the first couple were on stage for the White House Correspondents’ Assn. Dinner. Shots were fired outside the ballroom.
Three days later, the FCC announced it was requiring early license renewal applications for the Disney-owned stations.
The United States on Friday announced a flurry of new sanctions intended to increase pressure on Iran’s economy, targeting people and companies in China and Hong Kong that have been helping the Iranian military gain access to supplies and war equipment.
The sanctions came ahead of a major summit between President Trump and China’s leader, Xi Jinping, in Beijing next week. China’s support for Iran has become a flashpoint with the Trump administration, which has been trying to compel independent Chinese refineries to stop purchasing Iranian oil.
China is Iran’s biggest buyer of oil, and the Trump administration has said that it is sponsoring terrorism by propping up the Iranian economy.
The new sanctions are aimed at Iran’s military industrial supply chain, and are intended to make it harder for Iran to secure access to the material it needs to build drones and missiles. In addition to China, the sanctions also target people and companies based in Belarus and the United Arab Emirates.
“Under President Trump’s decisive leadership, we will continue to act to keep America safe and target foreign individuals and companies providing Iran’s military with weapons for use against U.S. forces,” Treasury Secretary Scott Bessent said in a statement.
The Trump administration has been looking for ways to squeeze Iran’s economy and pressure the Iranian government to reopen the Strait of Hormuz, a conduit for the flow of global oil. Oil tankers have had sporadic access to the critical waterway since the war started earlier this year, and the United States and Iran have been fighting over who should control it.
U.S. warships that have been trying to transit the strait have been attacked by Iranian forces. The United States on Friday fired on and disabled two Iranian-flagged oil tankers as they tried to reach an Iranian port.
The Treasury Department has also imposed sanctions on the Chinese “teapot” refineries this month. The independent refineries are major purchasers of Iranian oil. But China invoked a domestic policy ordering its companies to disregard the sanctions.
Mr. Bessent said earlier this week that he expected Mr. Trump to urge Mr. Xi to use the country’s leverage over Iran to pressure it to allow oil cargo to travel.
“Let’s see if China — let’s see them step up with some diplomacy and get the Iranians to open the strait,” Mr. Bessent told Fox News on Monday.
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