Tariff Wars Bring More Volatility

MarketSurge powers the charts in this video.

The news about the Chinese AI app. Deepseek sank the market last Monday. All AI-related stocks were the year-to-date best-performing group before that. On Monday, most gapped down around 15%. The premise was that if a Chinese company could build the same quality AI app with access to older, less powerful chips for a lot less money, then the entire AI theme needed to be repriced. As the week progressed, it became clear that Deepseek had access to Nvidia chips and that the real cost behind that app might have been billions of dollars. Last week’s volatility made two things crystal clear:

  1. The AI war is just starting, and companies will have to invest even more heavily to get an edge. I wouldn’t be surprised if the dip in semiconductors becomes a buying opportunity after proper new bases are built.
  2. The ban on smart chip export to China has not worked well. Chinese companies have access to the same technology. Will the US government intervene in some way and try to change that? Is it even possible to do that? After all, all chips are manufactured in Taiwan. Either way, this is a tall wall for Nvidia to climb. The potential headline risks have turned NVDA into a hot swing and intraday trading vehicle; not a longer-term hold for many.

In the meantime, we are still in the midst of earnings season. The price action in Big Tech has been bizarre. AAPL and TSLA missed on some elements and still had a sizable upside gap the next morning. Then that gap completely faded. META was already running ahead of their earnings, so the reaction to their big beat was muted. GOOGL and AMZN might be similar to META next week. MSFT was the one that was hit the worst and it is barely hanging near its YTD lows.

QQQ had fully recovered from the Deepseek gap by the end of the week when another hammer hit the market. Trump wants to tariff Canada and Mexico and is not bluffing about it. They account for 30% of the US foreign trade. Many US companies manufacture in those countries. It is a big deal for everyone’s bottom line and spending. The tariff war might cause a lot more harm to US stocks than the Chinese AI threat. QQQ is still above its 50dma and its YTD VWAP. It is still trading in a choppy range. If it goes back below 516-515, it could test its YTD lows near 500.

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