A Market Minute: Navigating the Impact of DeepSeek and NVIDIA on the Stock Market
Well, good morning, everyone. My name is Don Simmons, and I thought I'd just give a quick market update. There's been so much news this week around DeepSeek, the Chinese AI app, which has shot ripples through the stock market, especially with companies like NVIDIA that have lost nearly 600 billion of worth in just a matter of days and many clients are questioning, so what does this mean for the market and for our portfolios? I thought I'd just take a quick minute to digest this and let you know what we're doing. So here's Nvidia stock over this month. It's had roughly a 0 .4 % decline over the last 20 days. Most of that just this week dropping from about $150 a share down to $120 a share.
Now, why is that of concern to anybody? Well, it's of concern because the S &P 500 index has become more and more concentrated in a handful of tech giants in video being the largest of these. So the question is how will this down draft affect the rest of the market? I just have a few charts. It's funny because in my market outlook that I released the very first week of this month back in January, I said one of the biggest risks to the market was the concentration of in video and the risk that it would drop. So here we are less than 30 days later actually seeing that come to pass. Well, how about the Dow Jones Industrial Average, which is a mix of 30 stocks, not quite so tech heavy as the NASDAQ and S &P 500.
If we look at that over the past 28 days so far this month, the Dow Jones Industrial Average is actually positive for the year. So the market as a whole has not been quite as affected. The chart below of the NASDAQ shows that the NASDAQ is basically flat for the year and a lot of that underperformance is due to NVIDIA stock. The S &P 500, which has a large concentration of NVIDIA and other tech giants, is positive year -to -date. So we've not yet really seen a correction across the broad market. And I like to include gold here because gold has been one of the alternative investments in our portfolio. It zigs when the market zags. It's a great inflation hedge and has been one of our best performers the last year in our portfolios. Gold is up about 5 % for the year from $2 ,650 an ounce to $2,775 per ounce. So is this a correction?
No, I don't believe that this is a correction. The deep -seek correction tech stocks has not deranged the overall concentration -- well, it's not changed the overall concentration problem in the S &P 500. If you look at the chart below, investors in the S &P 500 continue to be dramatically overexposed to the tech sector. So will this one stocks faltering cause others to falter as well? It has not yet happened. The concentration of the biggest 10 companies still comprises almost 40 % of the S &P 500 index. That's the highest concentration that we've seen as far back as 1990. So this is something certainly still very much worth watching. I still believe that the market itself is overpriced a little bit.
It's at all time high relative to price to earnings ratios at 22 .3 times earnings. If you think back to the tech bubble in 2000, it reached a peak of 24 .5. Now that being said there's a lot of positives in the economy, unemployment is low, wage growth is positive, earnings are positive, the consumers in very, very strong shape. So, I'm not seeing a recession anytime soon, but with that being said, a market correction is not out of the picture later in the year if interest rates rise because of inflation and the Fed has to raise interest rates, that could put a break on things. But I love this slide, looking at inflation over the last 70, 80 years, you can see that the value of a dollar now takes about $18 because of inflation to buy what $1 would buy in 1926. But over that time, both bonds and stocks have done very well to keep up. So let's stay invested, let's keep a good balanced investment portfolio together. As we've already discussed we've taken action to add non -correlated investments, things that perform differently than the stocks and bonds themselves. We call these alternative investments and they've held up very well this month. They zig when the market zags, they add non -correlation, and they add alpha to our portfolios. So we are well positioned for whatever is going to come ahead.
So, in summary, I'd like to just say thank you very much for trusting us with your portfolio and feel free to give the office a call if you have any questions. Have a great day.