Gold Shines as Stocks Plunge on Worries about Chinese AI Tool
Posted onGold is shining—trading just below its record high—as the U.S. stock market tumbles amid concerns that a Chinese artificial intelligence company may provide cheaper and better technology than American tech firms.
Stocks tumbled in overseas trading to start the week and at the New York open, Nvidia crashed nearly 13%, wiping out over $400 billion in market value. In early action, the S&P 500 fell over 1.54%, the Nasdaq tumbled over 2.56% and gold is trading above $2,700 an ounce—not far from its all-time record high.
What you need to know about Chinese AI company: DeepSeek
A small Chinese start-up company called DeepSeek, founded in July 2023, launched a free AI tool that jumped to the top download in the Apple store, just seven days after its release. DeepSeek needs only a fraction of the data compared to U.S. tools to make it run and cost significantly less.
DeepSeek’s AI tool has upended Wall Street because of its low development costs—just over $5 million. By comparison, U.S. technology firms have routinely spent over $100 million to develop similar AI tools.
Is this a Sputnik moment?
The release of DeepSeek’s artificial intelligence tool has been likened to the “Sputnik moment” when the Russians first released a satellite into space in 1957. The United States confronted fears that there could be a technological gap between America and the Soviet Union.
Today, DeepSeek signals that U.S. technology firms, which are on track to invest over $1 trillion in AI over the coming years according to Goldman Sachs, may be behind in the AI race. The Chinese have seemingly discovered a way to produce similar or better results with lower-quality chips and significantly lower start-up costs.
What does this mean for U.S. stocks?
DeepSeek’s successful AI release raises questions over whether investors have overvalued U.S. technology stocks like Nvidia, Oracle, Meta, and Microsoft, which have been fueling the broader stock market’s advance. Some on Wall Street are warning this is the tipping point for the AI-fueled stock market bubble, and more significant losses could lie ahead—like the dot.com crash back in 2001.
How gold can protect your wealth
After two impressive years of gains, gold has cemented its position as an essential tool for portfolio diversification and risk management. Traditionally viewed as a safe-haven asset, gold provides investors the opportunity to protect, preserve, and grow their wealth even during periods of severe stock market volatility or downturn.
Gold has a proven track record of decoupling from stocks and climbing significantly when the stock market crashes. The unique characteristic of gold allows investors to hedge their portfolio against major bear market declines in the stock market and still grow their wealth during periods of crisis.
Whether or not DeepSeek turns out to be the pin that pricks the AI-stock market bubble, investors who own up to 10-15% of gold in their portfolios report better long-term returns with lower drawdowns.
If the stock market plunges, your portfolio invested in equities shrinks, while the portion of your portfolio invested in gold grows. Gold has a proven track record as insurance for your wealth. Take action today to ensure you keep more of the wealth you’ve worked hard to earn with an increased allocation to physical gold.
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