TOP STORY
😰 Nvidia Crashes 17% - Meta, Tesla, and Microsoft Report Earnings

🤯 This week has already been jam-packed with major stock market news - from Nvidia’s crash on Monday (due to the launch of DeepSeek), the Fed’s interest rates announcements yesterday, and Microsoft, Tesla, and Meta’s earnings reports last night.

🐝 So while this is the ‘Weekly’ Buzz, I’ve decided to write two editions this week to keep you updated on everything that's going on.

🔍 Today we’ll focus on Nvidia, Microsoft, Meta and Tesla, and Sunday we’ll deep-dive into Apple (plus any other crazy news that happens between now and then).

🎯 But first off, here’s how these stocks have performed so far this week (as of market open this morning):

• Nvidia ($NVDA): -14.1%

• Microsoft ($MSFT): -5.6%

• Meta ($META): +6.9%

• Tesla ($TSLA): +1.2%

🤿 Let’s dive into what’s going on with these 4 popular tech stocks…

📉 Nvidia Down 14% This Week After DeepSeek Panics the Market

📉 You’ve probably seen the headlines already - Nvidia crashed 17% on Monday, setting the record for the worst single-day market cap drop in stock market history (falling $589 billion, more than double the previous record on Sep 3, 2024 which was also held by Nvidia).

🎢 On Tuesday it made a +9% comeback as investors rushed to buy the dip, but fell another -5% yesterday. Other major AI players have also gotten hit:

• Oracle ($ORCL): -10.4%

• Arm ($ARM): -7.6%

• Broadcom ($AVGO): -9.6%

🇨🇳 The reason for all this chaos? DeepSeek, a Chinese competitor to OpenAI, released R1, a free AI model that it claims beats OpenAI’s $200/month o1 reasoning model on certain benchmarks.

💰 But it wasn’t the claim that the model was better that shocked investors - it was the cost. DeepSeek said it spent just $5.6 million training the model - challenging the common knowledge that it costs billions (and a whole lot of expensive Nvidia GPUs) to make a model that good.

🤑 For the past few years it’s been taken for granted that the AI revolution will cost billions, with the lions share of it going to Nvidia - and the spending was only accelerating. Just last week Trump announced Project Stargate, a $500B investment plan to build US AI infrastructure. 

⁉️ But DeepSeek has called into question whether all that money is really necessary. If it’s not, it could mean very bad news for Nvidia, whose valuation needs the endless AI money train to continue:

🛰️ The impact this has had on the market has been massive, with many headlines calling it AI’s ‘Sputnik moment’ (referring to when the Soviets launched the world’s first satellite, blowing past the US in the space race):

👀 Now before you go and sell all your AI stocks, many experts are saying the concerns are being widely overblown... so lets’s dive deeper into just how big a threat DeepSeek really is to Nvidia’s crown… 👑

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TOP STORY CONTINUED
👀 Just How Big of a Threat is DeepSeek to Nvidia?

🤔 There’s been a ton of debate swirling around as to how much of a threat DeepSeek really is. The biggest point of contention? The claim that DeepSeek built the model for only $5.6 million.

💰The reason many are saying it’s misleading is the $6M figure that’s been widely reported is just the cloud costs of the model’s final training run and excludes costs related to “prior research and ablation experiments on architectures, algorithms, or data.”

🤖 Scale AI CEO Alexandr Wang told CNBC that he estimates DeepSeek used roughly 50,000 Nvidia H100 chips to build the model (which would cost over $1B) but says they didn’t disclose this because it would violate US export controls.

🇨🇳 China also announced last week it would spend $137 billion on AI over the next few years - further evidence that the technology might not be as cheap to produce as DeepSeek claimed.

🚨 But while the $6M figure is being misrepresented, worries that DeepSeek’s breakthroughs might reduce training costs aren’t completely misguided - the model’s new techniques are reportedly extremely efficient at ‘inferencing,’ apparently reducing inference costs by 90%.

💡 But just because AI is cheaper doesn’t necessarily mean there will be less demand for Nvidia GPUs. In response to the fears - Microsoft CEO Satya Nadella referenced an interesting principle in economics: The Jevons Paradox, which shows that as production becomes more efficient, consumption actually increases as additional use cases become economical and are discovered:

The former CEO of Intel Pat Gelsinger shared a similar sentiment:

💡 My Thoughts + Analyst and Blossom Reactions

👨‍🎓 Fun fact about me, I graduated with an honours degree in economics, so these arguments are right up my alley, and frankly, I find them very compelling.

🤔 When I started writing this edition of the Buzz, the headlines (and what I’d seen on social media) seemed very concerning, but after deeper research, I do feel that the market seems to be overreacting to the headlines and getting swept up in fear.

👍 Analysts seem to agree, with most Wall Street Analysts saying the selloff is an overreaction and Bank of America analysts telling clients they “view the recent selloff as an enhanced buy opportunity.”

✨ The Blossom community is also largely optimistic, with 3,314 buys compared to only 760 sells.

🏆 Nvidia ranks as the #1 Most Visited and #1 Most Mentioned stock this week on Blossom and I highly reccommend you check out some of the great posts and discussions to see what other folks are saying (which you can find on the $NVDA stock page). One post in particular I want to call out was on the importance of not just ‘blindly buying the dip’:

EARNINGS WEEK
📊 Microsoft, Meta, and Tesla Report Earnings

🗞️ The Nvidia/DeepSeek saga wasn’t the only big news this week - 3 of the Magnificent 7 (the seven largest tech stocks in the US) also reported earnings last night - here’s the rundown.

📉 Microsoft Falls 5.6% As Investors Push for a Clearer Roadmap for Returns on AI Investment

• ✅ Earnings per share: $3.11, 4% higher than expected

• ✅ Revenue: $69.63B, 12% higher than expected

💡 Key Takeaways

• While this quarter’s earnings and revenue beat expectations, Microsoft’s $67.7B forecast for next quarter is 3% weaker than expected

• AI-driven Azure growth fell 3% short of expectations diven by ‘execution challenges’ and ‘capacity constraints’

• Investors are starting to push for a ‘clear roadmap to monetization for all the capital that’s been invested,’ putting more pressure on Microsoft to show results for the billions its investing into AI

• Microsoft CEO Satya Nadella emphasized cost optimizations, saying costs were coming down as models were showing 10x better performance

📈 Meta Up 2.8% After Smashing Past Earnings Estimates and Reiterating AI Conviction

• ✅ Earnings per share: $8.02, 18% higher than expected

• ✅ Revenue: $43.39B, 3% higher than expected

💡 Key Takeaways

• CEO Mark Zuckerburg reiterated plans to invest $65B into AI infrastructure, saying its AI assistant is ‘going to be one of the most transformative products we’ve ever made’ and announcing that it has surpassed 700 million monthly active users

• Zuck also said 2025 will be the year the company ‘redefines its relationship with governments’

• Ad impressions were up 6% and average price per ad was up 14% as analysts expects AI-driven advertising will provide a 2025 boost

📈 Tesla Up 3.7% Despite Big Miss on Earnings and Revenue As Elon Gives Timeline for Full Self-Driving

• ❌ Earnings per share: $0.73, 4% less than expected

• ❌ Revenue: $25.71B, 6% less than expected

💡 Key Takeaways

• Automotive revenue fell 8% to $19.8B, and operating income declined 23% year over year driven by it’s Q4 delivery miss (which we covered a few weeks ago)

• Elon Musk said paid, unsupervised full self-driving is coming to Austin, Texas in June

• Elon did not reiterate the 20-30% sales growth goals mentioned in October but did say that Tesla '‘expects the vehicle business to return to growth in 2025’

• Tesla’s Energy Storage business was a shining star - reporting $3B in revenue for the quarter, up 113% from last year

THANK YOU!
🙏 A Quick Note of Thanks

Thank you for reading to the end! I (Max, the CEO of Blossom) write all these Weekly Buzz editions myself, and they take a LOT of time to put together so I’m very grateful so many of you find them valuable (we’ve crossed over 60,000 weekly readers 🤯)

As I also posted on Blossom, I want to also share a quick thank you to everyone who’s given us a 5-star rating on the App Store - it helps us out a ton.

🙋‍♂️ If you haven’t rated us yet and you find value from the Weekly Buzz or from the Blossom community, it would mean the world to me if you could take 1-minute and leave us a review on the App Store or Google Play 🥹

Thanks again! See you soon on Sunday when there will be even more exciting stock market news to report on…