Wall Street Week Ahead -Feb 5-9
Wall Street Week Ahead (Feb 5-9) AI disruption shakes the markets, new tariffs take effect, and key earnings reports could drive major moves
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Feb 02 2025
Last week ended in the red for Wall Street, with the S&P 500 dropping 1% and the Nasdaq slipping 1.3%. The downturn was triggered by the Chinese startup DeepSeek, which unveiled an artificial intelligence (AI) model that challenged a key assumption in the semiconductor sector—that increased investment leads to higher performance.
For the past couple of years, the stock market rally has been largely fueled by big tech and semiconductor companies, particularly NVIDIA (NASDAQ: NVDA), which has made massive investments to maintain its dominance in the AI space. However, DeepSeek’s model threatens to upend this narrative. If the model truly matches or surpasses Western AI models in performance, it could significantly reduce the necessity for continued heavy investment in high-end semiconductor chips. As a result, NVIDIA suffered one of its worst weeks, tumbling 16%.
Last week ended in the red for Wall Street, with the S&P 500 dropping 1% and the Nasdaq slipping 1.3%. The downturn was triggered by the Chinese startup DeepSeek, which unveiled an artificial intelligence (AI) model that challenged a key assumption in the semiconductor sector—that increased investment leads to higher performance.
For the past couple of years, the stock market rally has been largely fueled by big tech and semiconductor companies, particularly NVIDIA (NASDAQ: NVDA), which has made massive investments to maintain its dominance in the AI space. However, DeepSeek’s model threatens to upend this narrative. If the model truly matches or surpasses Western AI models in performance, it could significantly reduce the necessity for continued heavy investment in high-end semiconductor chips. As a result, NVIDIA suffered one of its worst weeks, tumbling 16%.
Adding to market jitters, the new tariffs imposed by former President Trump officially took effect last Friday. The White House announcement sent markets from gains to losses. Now, with the dust settling, analysts are assessing the situation: What should investors expect in the Wall Street week ahead? Which major companies are set to report earnings?
Inflation Outlook
The U.S. PCE inflation rate stood at 2.6% at the end of 2024, with Core PCE at 2.8%. However, over the past six months, inflation has slowed to 2.2% and 2.3%, respectively—bringing it closer to the Federal Reserve’s target. Economic growth is also expected to cool, with slowing consumer spending likely driving inflation down further.
As for the impact of Trump’s tariffs, research from the Peterson Institute for International Economics (PIIE) suggests that the 25% tariffs on Mexican and Canadian imports and 10% tariffs on Chinese imports will raise U.S. inflation by 0.8% over two years. However, this increase appears to have already been priced into market expectations, with implied U.S. inflation rates rising by 1.5% since September to nearly 3%.
DeepSeek Aftermath
Despite the initial shock, some analysts are less concerned about DeepSeek’s AI model. According to Sylvia Jablonski, CEO and CIO at Defiance Investments, "DeepSeek's low-cost AI model has raised questions about future demand for high-performance chips, leading to a sell-off in NVIDIA. Investors are now reevaluating the AI chip purchasing strategies of the 'Magnificent Seven' tech giants, and earnings reports this season will provide the first clues about DeepSeek’s real impact."
Jablonski also argues that, in the long run, this development could actually boost AI adoption, ultimately benefiting NVIDIA. "NVIDIA’s innovation and strong financials position it well for continued growth, making the current dip a potential buying opportunity."
Meanwhile, Alex Posta, chief economist at Andbank, remains skeptical about China's ability to upend the semiconductor industry. "I can’t help but smile when I read that China is ‘reining in’ Western semiconductor dominance. The reality is that competition in this field is not just about ambition—it requires access to decades of accumulated knowledge and a global cooperation network."
Posta dismisses claims that China can single-handedly disrupt the semiconductor supply chain, citing U.S. sanctions restricting China’s access to critical chip components. "The semiconductor industry is one of the most complex and sophisticated in the world. A single nation, especially one facing restrictions, cannot overtake it overnight."
Earnings Season Continues
Following last week’s major earnings reports from Microsoft, Tesla, Meta, Apple, and Intel, this week will bring fresh insights from more tech giants. According to Paul Marino, Chief Revenue Officer at Themes Investments, "Tech earnings so far have highlighted strong demand for AI solutions in Q4, and projections suggest this trend will persist through 2025. For example, ASML’s CEO believes that DeepSeek’s innovation will not reduce chip demand but instead fuel even greater need."
Tesla (NASDAQ: TSLA) continues its climb despite missing revenue and delivery targets. Marino explains, "Tesla is no longer trading as a conventional car manufacturer but as a tech company, driven by its ambitions in autonomous driving, AI, and robotics. The stock surged on Elon Musk’s promise that the long-awaited Robotaxi will launch in 2026."
Alphabet (NASDAQ: GOOGL) is one of the major companies reporting this week. Analysts at Bank of America are optimistic: "Google is expected to meet or exceed Q4 earnings and revenue estimates, primarily due to strong advertising performance. Meta’s recent success and positive commentary on e-commerce suggest Google will also post strong results."
Final Thoughts
With markets on edge over AI disruptions, geopolitical tensions, and earnings results, the Wall Street week ahead promises significant volatility. Investors will be closely watching tech earnings for clues on AI investment trends and broader economic indicators for inflation and growth projections. Will NVIDIA bounce back? Will DeepSeek’s impact fade or intensify? Stay tuned for another eventful Wall Street week ahead.
Earnings Reports
Companies Reporting This Week
Tuesday
February 25
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Please note that the article should not be considered as investment advice or marketing, and it does not take into account the personal data and requirements of any individual. It is not a substitute for the reader's own judgment, and it should not be considered as advice or recommendation for buying or selling any securities or financial products.
