DeepSeek, the Chinese AI Startup, Roils Markets; Trump Holds Colombia Tariffs
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Good morning, I'm Nathan Hager. And I'm Karen Moscow. Here are the stories we're following today. And Karen, we begin with concerns over the impact that a Chinese artificial intelligence startup could have on big U.S. tech stocks. It is called DeepSeek. Buzz grew over the weekend about DeepSeek's latest AI model being cost-effective while running on less advanced chips. That's casting doubt on the validity of the sky-high valuations for companies like Intel,

NVIDIA. We get more from Bloomberg Markets reporter Mark Cudmore. I think this is probably a game-changing moment because I think suddenly the whole U.S. stock exceptionalism of the last 14, 15 years is probably undermined by this because it simultaneously is good for productivity and growth in the rest of the world, good for companies all over the rest of the world, and undermines the whole U.S. tech phenomenon. So I think it hits from both sides. So I think actually last Thursday we probably saw the long-term peak in U.S. share of global market cap.

Bloomberg's Mark Cudmore says the AI model from DeepSeek is widely seen as competitive with OpenAI and Meta's latest offerings. Nathan, Chinese startup DeepSeek is now top of the iPhone download charts despite being hobbled by sanctions. Capital.com senior market analyst Kyle Rada says it raises questions about the market narrative around U.S. tech dominance.

If anyone's on a sort of group chat with equity investors or any kind of equity strategist, phones are running hot effectively talking about, well, what is this product? How have they achieved these outcomes? And what does this mean for the AI investment boom in the United States? You know, it raises concerns about overinvestment in artificial intelligence. It raises concerns that perhaps the United States might have the competitive advantage that it has over the rest of the world. It raises concerns that chip demand won't be as great going forward either, and companies like NVIDIA are overvalued.

Capital.com Senior Market Analyst Kyle Rotta. Several of the big tech stocks falling on the news. Nvidia shares down 10 percent. ASML is off by about 11 percent. Meta and Microsoft are lower by well more than 4 percent. Palantir down 6 percent. Supermicro and SoundHound are off by at least 9 percent. And Karen, this deep-seek news comes just as investors brace for a slew of earnings from the Magnificent Seven. Bloomberg's John Tucker is following this end of the story. And John, a

Feels like the news couldn't get any more dicey. Well, it could. The company's shares have been near record highs. Their valuations are stretched, Nathan. And add to this the fact that the group's profit growth, it's projected to come in at the slowest pace in almost two years. Profits for the seven giants are projected to increase by...

22% in the fourth quarter from a year earlier. That actually would be the smallest jump since the first quarter of 2023. The seven companies' announcements, they start Wednesday. That's when Microsoft, Meta, and Tesla are scheduled to report. Apple follows Thursday while we get...

Alphabet and Amazon next week, and then chipmaker NVIDIA, that comes late February. CapEx, also going to be a big theme. Microsoft, Alphabet, Amazon admit it. They're all projected to have spent more than $200 billion combined on capital expenditures in their last fiscal year, and they've all pledged to spend more in the current year. In New York, I'm John Tucker, Bloomberg Radio.

All right, John, thank you. Now let's turn to the geopolitical dispute that's roiled global markets. In less than 12 hours, President Trump announced sweeping tariffs on Colombia, then reversed the threat after reaching a deal on the return of deported migrants. Colombia's President Gustavo Petro initially refused to allow two military planes to land because the migrants on board were in shackles. But last night, the White House declared that Colombia had agreed to all of President Trump's terms.

Goldman Sachs economist Kevin Daly says the tariff threat has not gone away. There were fears that a blanket tariff might be introduced immediately. We didn't have that. And on the back of that, our U.S. economists have lowered the probabilities of some of the tariffs. But, you know, tariff risk clearly hasn't gone away. And it's going to be with us for, you know, for a while now.

And that's Goldman Sachs economist Kevin Daly, who says the use of tariffs as a marketing tool is likely to shadow emerging markets for much of the next four years. And Karen, big tech companies are getting a warning from Vice President J.D. Vance when it comes to content moderation on their platforms.

We believe fundamentally that big tech does have too much power. And there are two ways they can go about this. They can either respect America's American constitutional rights. They can stop engaging in censorship. And if they don't, you can be absolutely sure that Donald Trump's leadership is not going to look too kindly on them.

Vice President J.D. Vance appeared on CBS's Face the Nation, heard Sundays on Bloomberg Radio. Tech CEOs have been making pilgrimages to President Trump's Mar-a-Lago club since his win in November, and they donated millions to his inaugural fund. Meta Platform has moved to end third-party fact-checking on its platforms this month. That was a move the president applauded.

Well, in sports, Nathan, it could be history in the making. The Chiefs are once again going to the Super Bowl. Let's get the very latest with Bloomberg Sports' John Stashower. John, good morning. Good morning, Karen. There's never been a Super Bowl three-peat. In fact, there's never been a team win two in a row and go back with a chance for a three straight. But in New Orleans in two weeks, Kansas City will have the opportunity in the AFC Championship game with Buffalo. The Chiefs blew an 11-point lead and trailed in the fourth quarter. First down play. Mahomes keeps it on an RPO at the five. Gets a lead.

Kansas City! Patrick Mahomes, a 16-yard run! His second rushing touchdown!

of the game. It's Radio The Call. KC won 32-29 and will now, like the Super Bowl two years ago, take on Philadelphia. The Eagles won the NFC over Washington 55-23. I'll be back shortly with more in sports. Karen and Ethan. Alright, John, thanks for that. Now let's get to the latest on the wildfires in Los Angeles. The ravaged region is finally getting its first rainfall in months, but that's posing a new risk, landslides. Brett Pasqua is a battalion chief with CAL FIRE.

This rate right now is really good. It's going to soak the ground for us. It's going to, you know, any hidden hot spots that we're still out there tackling, it's going to help with that. It's when the rate goes up and we start getting it really quickly that you're going to see that mud flows. And that's what we don't want.

Cal Fire Battalion Chief Brett Pasqua, right now a flood watch is in effect for Los Angeles County and several roads are closed due to mud flows. The Palisades Fire that's charred more than 23,000 acres is now 90% contained, while the Eaton Fire that destroyed much of Altadena is 98% under control.

And it's time now for a look at some of the other stories making news in New York and around the world. And for that, we're joined by Bloomberg's Michael Barr. Michael, good morning. Good morning, Karen. Israel is allowing Palestinians to return to the heavily destroyed north of the Gaza Strip for the first time since the early weeks of the 15-month war with Hamas in accordance with a fragile ceasefire.

Thousands of Palestinians headed north today after waiting for days to cross. In exchange, two more Israeli hostages will be released this week. Meanwhile, Israel and Lebanon have agreed to extend their ceasefire until February 18th.

to allow Israeli troops more time to withdraw. And Israeli Prime Minister Benjamin Netanyahu released a short message thanking President Trump. It comes after Trump ordered the resumption of shipments of 2,000-pound bombs to Israel. Thank you, President Trump, for keeping your promise to give Israel the tools it needs to defend itself, to confront our common enemies, and to secure a future of peace and prosperity.

Former President Joe Biden had put the shipments on hold, citing concerns about the use of the weapons in areas with high concentrations of civilians. The U.N. General Assembly has designated today as International Holocaust Remembrance Day. January 27th is the anniversary of the liberation of the Auschwitz concentration camps.

The day will honor the six million Jewish victims of the Holocaust. It comes as law enforcement notes a rise in anti-Semitism around the world.

Jocelyn Gretchen Kastenbaum is a professor of law at the Benjamin N. Cardozo School of Law. There are a significant number of survivors who are no longer with us, and therefore there is an increasing Holocaust denial. It's something that we must counter. And eyewitness testimonials have always been a powerful way to combat such denial. Law professor Jocelyn Gretchen Kastenbaum.

The first report on last month's Jeju Air crash in South Korea has confirmed traces of bird strikes in the plane's engines. Officials, though, have not determined the cause of the accident that killed all but two of the 181 people on board. Global News 24 hours a day and whenever you want it with Bloomberg News Now. I'm Michael Barr and this is Bloomberg. Karen. All right, Michael Barr, thank you. You worked hard to lay the foundation for your contracting business.

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Time now for the Bloomberg Sports Update brought to you by Tri-State Audi and we welcome back John Stashower. Hi, John. Hey, Karen. Super Bowl 59 in New Orleans. Same matchup as the game two years ago. Kansas City against Philadelphia. Conference Championship Sunday began with the NFC in Philly and here was the Eagles' first play. Hurts, under center on the first down. He pitches it out to Barkley. Takes off to the outside. He's at the 50. He's at the 40. He's at the 30. He's gonna

15, 10, 5, touchdown! Saquon Barkley, 60 yards on his opening touch. He touched it, and he took it to the house. It's as simple as that. WIP Barkley's seventh touchdown run of the season that went at least 60 yards, extending his NFL record. The ex-Giant would score two more touchdowns. Jalen Hurts scored three times. The Eagles overwhelmed Washington, 55-23.

It's the most points ever scored in a conference championship game. Philadelphia went to that Super Bowl two years ago but finished last season going 1-6. They started this year just 2-2. Since then, they are 15-1. The Chiefs this season, with Patrick Mahomes playing quarterback, are 17-1. Mahomes led KC past Buffalo in the AFC.

32-29, which makes Kansas City 12-0 this season in games decided by one score. They led Buffalo 21-10, then trailed by a point. Mahomes TD Ron gave them the lead back. The Bills tied it, scoring with six minutes to go. Chiefs went back ahead on a field goal. More heartbreak for the Bills and their fans. Kansas City's been made a slight favorite to win the Super Bowl, and if they do win, they become the first to win three in a row.

At the Garden, Rangers twice came back from a two-goal deficit, but Colorado scored with 15 seconds left. As beat the Rangers 5-4. Yannick Sinner, since the start of last year, 80-6. Nine tournament wins, three majors. He won a second straight Australian Open. John Staschauer, Bloomberg Sports, Karen and Ethan.

Coast to coast on Bloomberg Radio. Nationwide on Sirius XM. And around the world on Bloomberg.com and the Bloomberg Business App. This is Bloomberg Daybreak. Good morning. I'm Nathan Hager. We are seeing a rout in tech stocks this morning. Chinese startup DeepSeek is driving a lot of buzz around the idea of a low-cost artificial intelligence model running on less advanced chips.

Capital.com senior market analyst Kyle Rotta says it could mark a narrative shift for the U.S.-led AI boom. That kind of proverbial arms race in technology investment and AI investment has taken a very, very interesting turn when now China looks like a very viable competitor and

a competitor that, you know, perhaps might catch the ire of the Trump administration. It's Kyle Radda of Capital.com. And for more, we're joined by Bloomberg Radio and Television News anchor Kriti Gupta. Kriti, good morning. What is it about DeepSeek's model that we're hearing about right now that's got tech investors clearly so spooked this morning?

Well, good morning, Nathan. This is kind of the worst nightmare for a tech bull in that we know that so much money has been pumped specifically from the hyperscalers like Amazon, Microsoft, Apple, etc., who are sitting on trillions of dollars of cash just getting pumped into the future of artificial intelligence.

And that's, of course, what's created this massive stock market rally. The concern here now is that maybe all of that money didn't necessarily need to be put in to the extent that it has in the stock market. Let me walk you through some of my math here. And Nathan, for example, one NVIDIA Blackwell chip is expected to go on the market for somewhere like $30,000 to $40,000 per unit. Remember, we're talking about a chip alone and, of course, a ton, basically, of units per

used for one individual AI data centers, as so many of these companies are trying to build out, of course, hundreds of data centers around the world. So you can see very quickly how the argument of just how much one chip is valued can kind of skyrocket into almost an unknown positive figure. And that's the sentiment, at least, that's been fueling the stock market rally. But

But then lo and behold, DeepSeek, this Chinese startup around AI that's using technology very similar to that of OpenAI, which is already kind of on the front of the latest in AI technology.

They are now saying that they can do it on a much cheaper cost. So if you're talking about the things you need to get to artificial intelligence, think of it as a recipe. You need chips. You need engineers. You need software kind of talent who are thinking about this. You need a data center. You need an electricity grid. You need things like natural gas or oil to power that data center, even solar, for example, for the folks that are looking into that. Imagine if that

one element of that recipe is now able to be significantly cheaper. That's what DeepSeek has basically shown over the weekend and going into last week as well, that they can do that. They can provide the same sort of technology for a much cheaper price. So the reason you're seeing the market reflected is saying, well, hold on a second. If you can do this for not as

expensive of a price as previously thought, then why have these stocks been rallying to such an extent? And that's kind of the sentiment that's driving this global tech route today. And it's a sentiment that had driven so much of the rally, as you mentioned, up to now. That puts a focus, a pretty bright spotlight now, doesn't it, on the tech earnings that are coming up as soon as Wednesday for a lot of these big hyperscalers.

It absolutely does. And I think context is everything here, Nathan, because remember these hyperscalers, I mean, we talk about just a handful of companies that are powering NVIDIA. Remember NVIDIA over about 50% of their kind of gains and their customer base is really just from a handful of the mag seven names, your Amazons, your Microsofts, et cetera. And they're able to invest that much because they are still sitting on trillions of dollars of cash post pandemic and things that haven't really been able to be deployed in acquisitions. And this is something that's

the tech playbook is known very well for that, you know, you kind of bolt on some of these deals or you buy new technology. Think of Facebook, for example, buying Instagram back in the day, it's a similar playbook. They haven't really been able to do that and use that cash. Instead, they're spending a lot of that cash in investment and research. And of course, in AI. Now, basically, the element here is that maybe you don't need to do that. But I'm going to caveat all of this, Nathan, by simply saying this is still experimental technology. This is still just one example.

And we also don't have the full figures on what kind of chips they use, just how much it's costing, and whether or not there are others like it, or if this is just kind of a one-hit wonder. Those are still the questions that remain in this market.

This is Bloomberg Daybreak, your morning podcast on the stories making news from Wall Street to Washington and beyond. Look for us on your podcast feed by 6 a.m. Eastern each morning on Apple, Spotify, or anywhere else you listen. You can also listen live each morning starting at 5 a.m. Wall Street time on Bloomberg 1130 in New York, Bloomberg 99.1 in Washington, Bloomberg 92.9 in Boston, and nationwide on Sirius XM Channel 121.

Plus, listen coast to coast on the Bloomberg Business app now with Apple CarPlay and Android Auto interfaces. And don't forget to subscribe to Bloomberg News Now. It's the latest news whenever you want it, in five minutes or less. Search Bloomberg News Now on your favorite podcast platform to stay informed all day long. I'm Karen Moscow. And I'm Nathan Hager. Join us again tomorrow morning for all the news you need to start your day right here on Bloomberg Daybreak.

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