JPMorgan Private Bank US Equity Strategist Abby Yoder shared her insights on market reactions following Monday’s sharp sell-off, driven by the release of DeepSeek’s low-cost AI chatbot.
Yoder noted that while the S&P 500 (^GSPC) saw relatively low volatility throughout 2024, the recent disruption from DeepSeek’s emergence was unexpected. “We couldn’t have guessed the reason why,” she said, adding, “We didn’t expect it to be this.”
Market Volatility Viewed as a Positive
Despite the turbulence, Yoder remains optimistic, emphasizing that the current market shake-up is actually “healthy” as it helps reset valuations and encourages broader market participation.
She reaffirmed her bullish stance, maintaining a 6,400 year-end price target for the S&P 500.
AI Sell-Off Impacting Big Tech
Discussing the impact of AI developments on the stock market, Yoder highlighted that the sell-off primarily affected Big Tech, while the other 493 companies in the S&P 500 have remained relatively strong.
“What’s happened essentially is we have AI that’s just as effective at a lower cost,” Yoder explained. “If I’m a company in any other industry and I’m thinking, ‘Okay, there was this barrier in terms of cost previously, and now that’s been lowered, and now I can implement not only more use cases but at a lower cost,’ I think that’s the read-through.”
Conclusion
As DeepSeek’s breakthrough disrupts the AI landscape, markets are adjusting to new expectations. Yoder’s insights suggest that while Big Tech faces near-term headwinds, the broader market remains resilient. Investors will be watching closely to see how companies adapt to the changing AI cost dynamics.