Why Apple Stock Dodged the DeepSeek AI Rout

Key Takeaways

Shares of Apple ( AAPL ) charged higher on Monday, bucking the trend as its large-cap tech peers tumbled on concerns about overspending on AI.

AI stocks were reeling on Monday as Wall Street mulled the success of Chinese startup DeepSeek’s open-source AI model , which can reportedly compete with leading American models from the likes of OpenAI and Google at a fraction of the cost.

Apple, on the other hand, gained more than 3% Monday as what was once considered a headwind for the company—its relatively modest investment in AI compared with its mega-cap peers—came to look more like a tailwind.

The efficiency of DeepSeek’s AI could also be contributing to Apple’s outperformance. The iPhone maker's AI success depends on its ability to develop devices powerful enough to run AI models. DeepSeek’s efficiency suggests that could be a less challenging and less expensive prospect than it once seemed.

Jefferies analysts in a note on Monday warned, though, that an AI model efficient enough to run on an iPhone without raising costs is likely a ways off. “DeepSeek’s success offers some hope,” they wrote, “but there is no impact on AI smartphone's near-term outlook.”

Nuclear Power and Chip Stocks Tumble

Nuclear power stocks Vistra ( VST ) and Constellation Energy ( CEG ), which have run up in the last year amid surging electricity demand from AI data centers, led the sell-off on Monday. AI chipmakers like Nvidia ( NVDA ) and Broadcom ( AVGO ) plummeted as DeepSeek raised concerns that American tech companies don’t need the most advanced, expensive chips to run powerful models.

Cloud hyperscalers Microsoft ( MSFT ) and Alphabet ( GOOG )( GOOGL ) also fell on Monday. They have spent tens of billions of dollars on the AI arms race, building data centers, outfitting them with the most advanced hardware, and signing deals with energy providers to secure reliable sources of electricity. Jefferies analysts speculated DeepSeek could put executives at these companies under pressure to slow their pace of AI investment and explore ways to match DeepSeek’s efficiency.