Trading Observations

• Is it real? Did they really create DeepSeek as fast and as cheap as claimed? Is fear overblown

• Certainly in a shoot first ask questions later environment given valuations and concentration with carnage to start with semis, power bearing the brunt

• Seeing many ask is this the top in Mag 7?  Think this sums things up well... "I don't recall the announcement of a single piece of technology like DeepSeek having such a dramatic impact. Stunning how the market was caught by surprise. Normally a panic open like this creates good opportunity but the problem we have with DeepSeek is that there isn't any clarity. It just creates huge uncertainty."

• Software may actually benefit after the initial knee-jerk, we shall see

• On S&P, 5980 is support zone with 5850-5860 below

• Nazz 19490 (50-day) and 19100 are levels to watch, let's see how we react post open

• For the skeptic, per Mike Desepoli... "The people who believe Deepseek will overtake American tech (they won’t, they’re running on $NVDA H100s by the way)…are the same people who told you a year ago that Temu was going to overtake $AMZN."

• Apart from that, setup for the busiest week in some time

• Earnings dominate with META + MSFT even more important Wed night

• Fed back in play Wed? PCE Fri

Futures

DOW -340

S&P -130

Nasdaq -770

10-Year Yield

Oil

BITCOIN

Financials / Retail / Healthcare

SOFI – Down 10% - As if growth needed more negative news today, the one growthy US bank said EBITDA of $865M missed $906M estimates. Still revenues were up 52% y/y, unheard of for a bank, which is why the name isn’t down more given the run it had into this miss.

Crypto names – All down 3-6% on risk off. The COIN CEO said, “the surge in new tokens is making things difficult”. $TRUMP and $Melania may have broken the market.

FNMA, FMCC – Down 7% and 5% as KBW downgraded the names to underperform. We would reiterate Fannie/Freddie are worth whatever our government says they are worth.

DHI – Downgraded to neutral at BAC. Bad timing as the home builders will likely have a good day today.

XYZ – This is the new ticker for Square/Block (more name changes than Prince). Baird likes the name to beat modestly after a good November with growth reiterated.

Credit card balances on the rise in a modest sign of growing consumer strain - WSJ

Musk exploring blockchain use in US Gov’t efficiency push – Bloomey

TGT becomes the latest major company to dial back its focus on DEI initiatives - Reuters

Technology

Tech futs smashed as DeepSeek triggering another wave of panic amongst investors as ppl digested potential impact of a Chinese built technology rivaling the capabilities of all the US leaders despite spending a fraction of the money and not having access to cutting-edge chips. NVDA/AVGO/ASML/TSM/MRVL/PSTG/DELL/ARM down at least 10% .... Asian mkts mixed with Taiwan/SK closed.

AI mess: DeepSeek’s success typifies an intensifying US vs China AI rivalry (see the latest Economist cover), and shows the unintended consequence of US restrictions on chips forcing China to become more innovative. Nadella: "To see the DeepSeek new model, it’s super impressive in terms of both how they have really effectively done an open-source model that does this inference-time compute, and is super-compute efficient"

DeepSeek: getting much more attention after topping Apple download charts. DeepSeek-V3 model notably cost-effective, trained using only 2.788mln GPU hours, using approximately 2,000 Nvidia specialised chips, spending about $6mln on computing power - training similar models typically costs upwards of $60mln (Meta’s Llama took 30.8mln GPU hours and spent 10x on its latest model).

AI POWER: sea of red on both sides of pond this am .... VRT-18%, GEV-14%, OKLO-12%, etc. Scheider Electric, Seimens, VAT, Legrand, BBB, Prysmian, Soitec, Comet all smoked in Euro trading

GOOGL: co’s TPU and DeepMind businesses alone could be worth >$700B or ~$60/shr. (Barrons) GOOG, UBER & AMAT are among the latest batch of top stock picks from the Barron's Roundtable – saying Alphabet’s AI chip biz is a hidden ge

RDDT: JMP positive, PT $190 - believes the advertising environment is healthy, driven by positive consumer spending over the holiday period, the contribution of political ad spend, and better business sentiment

TikTok: Trump said there would be a decision on what to do with TikTok within the next 30 days (the White House is apparently working on a proposal whereby Oracle and a group of outside investors would assume control of the app’s US operations, w/ByteDance retaining a stake) (Reuters)

Industrials 

APTV and TITN – Upgraded at Baird

Beacon Roofing (BECN): QXO to launch hostile bid for Beacon Roofing Supply at $124.25/sh - media report

Dana (DAN) Raised to Equal-Weight at Wells Fargo; PT $16

DR Horton (DHI) downgraded to Neutral from Buy at BofA

Emerson (EMR) to acquire remaining outstanding shares of AspenTech for $265.00 per share pursuant to an all-cash tender offer

GFL Environmental (GF) Rated New Buy at Citi

Waste Management (WM) upgraded to sector outperform from sector perform at Scotiabank GBM

JBLU - The airline is offering early retirement packages to some pilots, CNBC reported, citing a memo it had seen.

F - The automaker is recalling 149,449 vehicles, according to a notice filed online Saturday by the National Highway Traffic Safety Administration.