The latest Greed and Fear note by Chris Wood said that Jefferies has reduced exposure to chipmakers Nvidia and TSMC by up to 2 percentage points, and has exited ASML and South Korean semiconductor company Hynix, while increasing weightage of HDFC Bank in its portfolio to 4%.
Commenting on the upheaval in the global AI and semiconductor space after Chinese startup DeepSeek's low-cost LLM, Greed and Fear said the development may mean that investing in AI 'may not be as expensive' as previously thought. Chris Wood said he sees hardware supply chain in the AI ecosystem coming under pressure after the progress showcased by cost efficient model of DeepSeek, adding that Greed and Fear has advocated investing in 'picks and shovels' theme within the AI space since April 2023. The note added that the Greed and Fear global portfolio does not have exposure to AI hyperscalers.
"...with the DeepSeek development GREED & fear will, ahead of the pending Chinese New Year, reduce holdings in the AI picks and shovels plays in the various portfolios precisely because of the potentially dramatic implications of the DeepSeek news," said the note.
Chris Wood said he sees leading players like Meta Platforms to reverse course and slash capex spending, going forward. Investments in Nvidia and TSMC will be reduced by two percentage points and one percentage point, respectively.
Shares of Nvidia fell as much as 13% on Monday, wiping out about $465 billion in market capitalization, its biggest such wealth loss ever. DeepSeek’s low-cost approach reignited debate over how much funds big US companies have poured into developing artificial intelligence, while the Chinese firm provided a comparable performance to Western applications at a fraction of cost.
Chris Wood added that Greed and Fear will reduce holdings in AI picks and shovel plays, ahead of the Chinese new year.
Jefferies' Greed & Fear has adjusted its Asia ex-Japan long-only portfolio and reintroduced HDFC Bank, taking total exposure to Indian private banks to 12%, its December note had revealed. Shares of HDFC Bank are higher by more than 2% in trade on January 28, but so far this year, they are down by over 6%.
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