Monthly Market Debrief

Market Snapshot

Well, inflation was up again in December. The FED Committee reiterated its stance that it seeks to bring inflation down to 2% and “would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals.” In other words, don’t expect more rate cuts anytime soon… I won’t even whisper the other possibility.

Who’s to blame for all of this? Jerome Powell and his DEI endeavors, of course /s. 

The stock market was down on the inflation news but lifted by strong earnings reports. So far, 1/3 of S&P 500 companies have reported 2024 Q4 earnings with 77% of those companies reporting better than expected earnings. 

Unlike 2024, the NASDAQ started the year worse than the other indexes due to a Chinese startup that rocked the tech world. More on that below…

Company Highlight - NVIDIA / DeepSeek

Look, I also didn’t want to write about NVIDIA for all of 2025 but something big happened last month. DeepSeek, a private, Chinese, AI company released an AI model that rivals OpenAI’s ChatGPT. The kicker is that DeepSeek’s model uses less energy to train and runs on lower performance NVIDIA chips (possibly). On the news, NVIDIA lost almost $600 billion in one day, a new record. 

Since seemingly every company is pouring billions into developing AI models, DeepSeek’s claim to only need $6 million to create their R1 model made everyone ask “are we burning cash?” To which, the obvious answer is, yes. 

DeepSeek used a new, more efficient method to train its model. ChatGPT was trained by having it read everything and anything it could find. Then, when someone asks a question, ChatGPT says, “sure, I remember reading that, here’s the answer.” DeepSeek’s R1 instead learned where everything is. Then, when someone asks a question, R1 says, “sure, I know where I can find that, here’s the answer.”

This new technique required far less energy and time for an equally quick and accurate response. 

Apart from this better technique, DeepSeek claims to only use legally obtained NVIDIA chips. This is a hotly contested claim. DeepSeek purchased NVIDIA’s H800 chips until the Biden Administration tightened export controls in 2023. We may never know if they continued to purchase the H800 or newer, more powerful chips in 2024; however, we do know that illegal AI chip smuggling through Malaysia to China is an increasingly utilized black market. 

The initial news hit NVIDIA hard as people questioned the need for their newest, most expensive chips. Then, everyone realized that NVIDIA is still at the center of this model and the stock slowly recovered some of its losses.

2024 was the year for the AI boom. 2025 may be the year for the AI bust. With the S&P 500 dominated by tech stocks like NVIDIA, Apple, and Microsoft you may be worried that a tech bubble bust will destroy your portfolio. If so, check out $RSP. This is an equal weight S&P 500 ETF that spreads the love equally between each company. NVIDIA is only 0.17% of the ETF compared to 6% in $VOO (a popular, weighted S&P 500 ETF). 

What We Are Listening To:

Podcast - Freakonomics: Why don’t running backs get paid anymore? This is an interesting look at how analytics and the rise of the passing game decreased the value of running backs in the NFL. Saquon Barkley is going to do everything he can this Sunday to prove the analytics wrong.

Debrief on Deck

Next week we will talk about the price of gold. Usually, gold is an inverse of the stock market. When one is up, the other is down. 2024, however, saw this trend disappear with gold increasing 25.5% while the S&P 500 also increased 23%.