Investors faced unexpected challenges on Monday as news emerged about a Chinese AI service named DeepSeek, which claims to outperform OpenAI in cost and performance.

DeepSeek Gives Established Players a Run for Their Money

This past weekend, reports surfaced that DeepSeek’s R1 and V3 models perform on par with or better than ChatGPT. DeepSeek also claims that its AI search algorithms require significantly less energy than ChatGPT and other large language models (LLMs). However, the extent of the energy savings varies widely in reported figures.

AI Innovation Amid Export Challenges

Interestingly, DeepSeek’s achievements come despite the Biden administration’s export restrictions aimed at limiting access to advanced AI chips produced by NVIDIA Corporation (NVDA).

Market Reactions Trigger Major Selloff

These developments have sparked doubt about the future trajectory of the AI industry. Many investors are questioning if the resource-intensive U.S. AI sector can maintain its lead. This uncertainty triggered a significant selloff, with NVIDIA shares dropping by a dramatic 17%, while other AI-related stocks experienced even steeper declines.

Understanding Market Psychology

It’s crucial to remember that the stock market often behaves like a bustling crowd that reacts more than it thinks. As noted in my Tuesday update for Market 360, the recent market panic reflects this phenomenon, with investors reacting passionately without sufficient analysis.

Reassessing the Situation

Fortunately, a clearer perspective seems to be emerging. Investors are realizing that they cannot simply accept DeepSeek’s claims without scrutiny.

A Call to Action from Industry Leaders

Former President Donald Trump described the DeepSeek news as a “wake-up call” for U.S. companies to reaffirm their leadership in AI technology.

What Should Investors Do Next?

If you’re keeping a close eye on the AI competition, you might be seeking clarity on this situation. Earlier this week, InvestorPlace Editor-in-Chief Luis Hernandez joined me, Eric Fry, and Luke Lango—the creators of the AI Revolution Portfolio—to delve into these questions. You can find more details about the AI Revolution Portfolio here.

Watch our discussion by clicking here or using the video below.

Tracking Promising Stocks in the AI Field

As Luis outlines, our team meticulously crafted the AI Revolution Portfolio with top-tier stocks poised for success in the AI boom.

We aim to identify AI companies capable of transforming industries, which could lead to their stocks rising significantly in the next 12 to 36 months. Our AI Revolution Portfolio achieved a return of over 21% last year and continues to outperform the broader market this year.

Staying Resilient Amid Market Volatility

Though this week’s market swings may be unsettling, remember: our AI Revolution Portfolio companies are generating superior profits compared to competitors, suggesting that the recent selloff could be exaggerated.

To explore more about our AI Revolution Portfolio, click here.

Sincerely,

Louis Navellier

Editor, Market 360

The Editor hereby discloses that as of the date of this email, the Editor, directly or indirectly, owns the following securities that are the subject of the commentary, analysis, opinions, advice, or recommendations in, or which are otherwise mentioned in, the essay set forth below:

NVIDIA Corporation (NVDA)