CNBC's "Fast Money" Podcast Summary: Tech Sells Off On DeepSeek Concerns… And Fed Decision On Deck (Release Date: January 27, 2025)

On the January 27, 2025 episode of CNBC's "Fast Money," host Melissa Lee, along with a panel of top traders—Tim Seymour, Carter Worth, Steve Grasso, and Mike Ko—delved into a tumultuous day in the markets triggered by significant developments in artificial intelligence (AI) and anticipated decisions from the Federal Reserve. The episode provided in-depth analysis on the DeepSeek AI model's impact on Big Tech, sentiments around Nvidia’s stock performance, the energy sector's downturn, and the looming Federal Reserve meeting.

1. Market Overview and Historic Sell-Off

Tim Seymour opened the discussion by highlighting a historic day in the stock market driven by concerns over the Chinese AI model, DeepSeek. "DeepSeek was responsible for a nearly $600 billion loss in market capitalization today—the largest single-day loss in dollar terms ever," he stated at [00:16]. This sell-off was primarily fueled by the retreat in AI-related stocks, notably Nvidia, which experienced its worst day since the pandemic began, dropping below its 200-day moving average for the first time in over two years.

2. DeepSeek AI: A Game-Changer for AI and Its Market Implications

Deirdre Bosa, a tech analyst, provided a nuanced perspective on DeepSeek. At [02:32], she clarified, "This is an open-source model, so we can see inside of it and compare it using third-party benchmarks. It is just as impressive as people say it is." She emphasized that DeepSeek's efficiency and cost-effectiveness are pushing large US AI companies like OpenAI and Google to re-evaluate their strategies. Deirdre pointed out that the open-source nature of DeepSeek allows widespread adoption and innovation, potentially democratizing AI but also raising geopolitical concerns.

Melissa Lee and Courtney Reagan further explored the implications, with Courtney noting at [26:27], "It shows us that the best minds and technology can't be constrained," highlighting the resilience and adaptability of the global tech community despite regulatory efforts.

3. Nvidia’s Turbulent Performance and Future Outlook

The conversation shifted to Nvidia, the heavyweight in AI hardware, which saw its stock plummet by nearly 17% in a single day. Carter Worth provided insights at [08:42], suggesting that while the drop was significant, it might not necessarily signal a long-term decline. "There's no question that this trade and the excitement around this trade has been kind of dead for a while. But there's still so much faith that has been placed in AI and spend," he commented.

Mike Ko added strategic advice regarding Nvidia's volatility: "Let the dust settle. I made a purchase today. I think that things got overdone," he shared at [10:10], suggesting a cautious approach for traders looking to capitalize on the dip.

Dan Niles further analyzed options trading around Nvidia, noting at [14:25] that despite the stock's decline, call options outpaced puts, indicating that some traders are betting on a rebound. "Buyers were paying about a buck 80, a little bit more than that," he explained.

4. Impact on the Energy Sector: Nuclear Stocks Take a Hit

The rapid advancements of DeepSeek have also cast a shadow over the energy sector, particularly nuclear energy stocks. Pippa Stevens reported significant declines, with companies like Vistra and Talon Energy tumbling over 20%. This downturn is attributed to concerns that more efficient AI models like DeepSeek reduce the overall demand for energy-intensive data centers. Arthur Hyde from Segregate Capital offered a tempered view at [40:38], stating, "DeepSeek doesn't really change much for nuclear over time, but some of the independent power producers are dropping."

Dan Niles suggested a strategic play on the energy sector by recommending a "barbell trade"—buying a mix of natural gas and uranium equities to hedge against volatility.

5. Federal Reserve’s Upcoming Decision and Economic Outlook

With the market bracing for the Federal Reserve’s first meeting of the year, discussions centered around the potential stance of Fed officials amidst the market volatility and geopolitical tensions introduced by DeepSeek. Ben Emmons from Fed Watch Advisors provided his perspective at [33:40], stating, "Market pricing at near 100% of on hold. ... he will point to that."

There was consensus that the Fed is likely to adopt a dovish stance, maintaining current interest rates while keeping options open for future adjustments. Carter Worth echoed this sentiment at [38:16], suggesting that the Fed might maintain rates around 4.5% without significant hikes or cuts in the immediate term.

6. US Steel and Activist Investors: A Strategic Push

The episode also covered the activist investor movement within US Steel. Steve Grasso highlighted efforts by activist investors to push for new leadership and potential acquisition by Nippon Steel. "If we're talking about consolidation in this space... I think the stock goes much higher," he opined at [30:30]. Dan Niles supported this view, noting that such consolidation efforts could provide meaningful upside for US Steel amidst prevailing market conditions.

7. Trading Recommendations and Final Thoughts

As the episode concluded, the panelists shared their trading recommendations amid the ongoing market turbulence:

• Carter Worth advised caution with Nvidia, suggesting waiting for a clearer trend before buying.
• Mike Ko advocated for strategic entry points, emphasizing patience and risk management.
• Dan Niles recommended diversification within the energy sector, balancing between natural gas and uranium stocks to mitigate risks.
• Steve Grasso emphasized the importance of focusing on ROI and the long-term potential of AI-driven industries beyond immediate market reactions.

Courtney Reagan and Melissa Lee wrapped up the discussion by underscoring the accelerated adoption of AI technologies, driven by models like DeepSeek, which are reshaping market dynamics and investment strategies.

8. Looking Ahead: Upcoming Conferences and Market Events

The podcast highlighted the forthcoming Iconnections Global Alts conference in Miami, where panelists like Sunny Madra, CEO and President of AIA AI Company, would share further insights on AI advancements and market implications. Additionally, the episode teased coverage of the Senate vote on Treasury Secretary nominee Scott Besant, emphasizing the interconnectedness of technology developments and broader economic policies.

Notable Quotes:

• Deirdre Bosa at [02:32]: "This is an open-source model, so we can see inside of it and compare it using third-party benchmarks."

• Carter Worth at [08:42]: "There's just so much faith that has been placed in AI and spend, and the impacts that today is at least a wake-up call."

• Mike Ko at [10:10]: "Let the dust settle. I think that things got overdone."

• Ben Emmons at [33:40]: "Market pricing at near 100% of on hold."

This episode of "Fast Money" provided listeners with a comprehensive analysis of the day's unprecedented market movements, driven by groundbreaking developments in AI and the resultant economic ripple effects. The panelists offered strategic insights and cautious optimism, navigating the complexities of a rapidly evolving financial landscape.