DeepSeek V4 Could Trigger Another Nasdaq Shock — What Investors Must Know Now

The Chinese AI startup rattled global markets in January 2025. With a new model release expected imminently, Wall Street is bracing for a potential repeat — and semiconductor stocks may be the most vulnerable.

Wall Street has a new worry, and it has a familiar name. DeepSeek, the Chinese artificial intelligence startup that blindsided global markets just over a year ago, is expected to release its next major model — DeepSeek V4 — in the coming days, following last week’s conclusion of the Lunar New Year holiday. If history is any guide, investors in Nasdaq-listed technology and semiconductor stocks should be paying close attention.

The company has not announced an official release date, but the timing pattern is clear. DeepSeek has historically released major models in the early calendar year, most infamously in January 2025, when the launch of its open-source reasoning model sent shockwaves through financial markets and triggered one of the sharpest single-day selloffs in recent memory for AI-related stocks.

What Happened Last Time: The January 2025 Shock

When DeepSeek’s previous model dropped in January 2025, the market reaction was swift and severe. The Nasdaq Composite fell 3% on January 27 alone. Nvidia (NVDA) — widely considered the backbone of the AI infrastructure buildout — lost nearly 17% of its market value in a single session, one of the largest single-day dollar losses in stock market history for any company.

The reason investors panicked was straightforward: DeepSeek claimed it built a high-performance AI reasoning model in just two months, for under $6 million, using lower-capacity Nvidia chips. That narrative directly challenged two of the market’s most deeply held assumptions — that U.S. companies had an insurmountable lead in AI, and that the AI buildout would require hundreds of billions in datacenter spending.

Market Reaction — January 27, 2025 (DeepSeek V3 Launch)

Nasdaq Composite-3.0%

Nvidia (NVDA)-16.9%

VanEck Semiconductor ETF (SMH)-9.8%

iShares Tech-Software ETF (IGV)-1.7%

S&P 500-1.5%

Notably, semiconductor stocks bore the brunt of the damage. The VanEck Semiconductor ETF (SMH) tumbled nearly 10% and — critically — failed to recover those losses even a full month after the release. Software stocks, while impacted, showed more resilience. The iShares Expanded Tech-Software Sector ETF (IGV) fell 1.7% on the day, slightly underperforming the broader S&P 500’s 1.5% decline.

Why DeepSeek V4 Could Cause a Repeat

The stakes heading into a V4 release are arguably higher than they were in January 2025. The stock market is already navigating a fragile environment. Traders are simultaneously weighing President Trump’s latest tariff policy shifts, the possibility of a U.S. military strike on Iran, and the uncertainty surrounding Nvidia’s upcoming earnings report — a result that many consider the most consequential data point for AI investors this quarter.

A new DeepSeek release that again demonstrates high capability at low cost would directly undercut the narrative that has driven hundreds of billions in capital toward AI infrastructure spending. If the market perceives V4 as another leap forward in efficient AI development, the selloff in chip stocks and datacenter-related names could be immediate and sharp.

Bear Case Watch: JPMorgan’s trading desk has flagged two key risks — an Nvidia earnings miss combined with a new DeepSeek release would be a particularly toxic combination for Nasdaq. The bank maintains a tactically bullish view but acknowledges the downside scenario is real and material.

JPMorgan’s View: Bullish but Cautious

Not everyone on Wall Street is bracing for disaster. JPMorgan’s trading desk has maintained a tactically bullish outlook on megacap technology, arguing that broader AI anxiety could dissipate and that large-cap tech names could stage a recovery. The bank’s view is that the market may have already partially priced in DeepSeek risk following last year’s episode.

However, the bank explicitly identified the bear case: an Nvidia earnings miss paired with a V4 release that replicates — or exceeds — the impact of January 2025. In that scenario, JPMorgan’s analysts suggested the market could experience what they described as a “DeepSeek Part Two” moment.

Monday’s Selloff — Already Feeling the Pressure

Markets did not wait for V4 to arrive before selling off. On Monday, the Dow Jones Industrial Average tumbled more than 700 points, a decline of approximately 1.5%. The S&P 500 fell 1% and the Nasdaq Composite slid 1.1%, as investors weighed the convergence of DeepSeek uncertainty, tariff headlines, and geopolitical risk.

The broad-based selloff suggests that risk appetite is already thinning — meaning a high-impact DeepSeek V4 release could hit a market that has less cushion to absorb the shock than it did a year ago.

Which Stocks and ETFs Are Most at Risk

Based on the January 2025 playbook, semiconductor-focused positions carry the highest near-term risk. The VanEck Semiconductor ETF (SMH) is the most direct barometer of chip sector sentiment and was the hardest hit last time. Individual names with heavy AI datacenter exposure — Nvidia chief among them — are the most obvious vulnerability.

Software stocks appear more insulated but are not immune, particularly names that have benefited from AI-driven revenue growth narratives. The IGV ETF is worth watching as a relative performance indicator against SMH — a wide divergence between the two post-release would confirm the chip-specific nature of the selloff.

For investors looking to manage risk, the weeks ahead warrant close attention to position sizing in semiconductor names, Nvidia’s earnings report, and any official announcement from DeepSeek on V4’s release timeline and capabilities.

Bottom Line for Investors

DeepSeek V4 is coming. The timing is uncertain but the direction is not. Investors who were caught off guard in January 2025 have a rare opportunity to act with advance warning this time. Whether V4 triggers a repeat selloff or the market shrugs it off will depend heavily on the model’s benchmarks, its cost efficiency claims, and the broader market mood at the time of release — all of which remain unknowns for now.

What is known is this: the market is fragile, DeepSeek has already proven it can move markets dramatically, and Nvidia’s earnings this week will set the tone heading into whatever comes next.

Watch the SMH ETF, watch Nvidia, and watch for any DeepSeek announcement. Those three data points will likely define the next major move in AI-related equities.

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Disclaimer: This article is for informational purposes only and does not constitute financial or investment advice. USAStockReport.com and its contributors are not registered investment advisors. Always conduct your own due diligence and consult a licensed financial professional before making investment decisions. Past market performance is not indicative of future results.