Quick shot: The download on DeepSeek

A new artificial intelligence (AI) model called DeepSeek-R1, developed by the Chinese startup DeepSeek, has recently been released and is generating quite the stir. Reports suggest that its performance is on par with some of the top models, like those from OpenAI, but could be significantly cheaper to operate.

The release of DeepSeek-R1 is exciting because it demonstrates that AI technology is becoming more advanced and efficient. This is positive news for companies that develop AI applications, as they can potentially access a powerful tool without the elevated costs. However, some investors are concerned because this could alter how much companies need to invest in more sophisticated AI hardware. Despite these concerns, the major U.S. tech companies are expected to continue investing heavily in AI and could see the potential of lower costs as an opportunity for AI usage to expand. This means AI could be applied more widely in fields like robotics and self-driving cars.

From a broader economic perspective, the advancements made by DeepSeek could be beneficial if they do accelerate the adoption of AI across various industries. As AI becomes more efficient and affordable, its use is likely to increase, which could boost economy-wide productivity.

While there may be short-term fluctuations in equity markets, the long-term outlook for AI development remains positive. The recent market volatility, though unsettling, is a normal part of investing and underscores the importance of bolstering portfolio resilience through proper diversification, a consistent approach to portfolio rebalancing and ensuring portfolios align with goals.

All third-party companies referenced are shown for illustrative purposes only and are not intended as a recommendation or endorsement by J.P. Morgan in this context.

All market and economic data as of 01/27/25 are sourced from Bloomberg Finance L.P. and FactSet unless otherwise stated.

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