On Monday, the American Nasdaq stock market took a hit of 3% following the massive spike in Chinese competitor Deepseek’s new AI model, which caused Nvidia’s stock to plummet by 17%. This resulted in a loss of 6.5 billion kronor in market value for Nvidia.

“This is a wake-up call for the high risks out there, making it increasingly sensitive,” stated SEB’s chief economist Jens Magnusson during the presentation of the bank’s macroeconomic forecast for 2025.

“It was a sort of ‘Sputnik moment’,” he added.

The term ‘Sputnik moment’ refers to when someone or something realizes they are lagging behind in technological development. It harkens back to when the Soviet Union launched the world’s first satellite in 1957, ahead of the United States, sparking the space race between the two superpowers.

Chief economist Jens Magnusson is not alone in drawing this comparison. After Deepseek’s new AI model was unveiled, renowned venture capitalist Marc Andreessen posted on X about how this marked the AI sector’s Sputnik moment.

While Magnusson believes that as long as the US market recovers, Nvidia’s drop will not have significant effects on the Swedish economy. However, if this signals the beginning of a larger market downturn, it could have consequences, including on consumption.

“If this is the start of a longer decline in the US tech sector, it could lead to a decrease in Swedes’ stock holdings and increased caution in consumption,” Magnusson warned.

He pointed out that profit expectations for American companies are currently too high.

“Profit expectations are based on growth rates around 3%, which we do not believe the US GDP will sustain. This suggests that many American stocks are overvalued and may need to adjust downwards,” he explained.

Therefore, he continued, it is worth considering whether the Nordic region and Europe as a whole have greater potential in 2025.

“Especially because valuations are lower here, but of course, it’s not guaranteed. Nevertheless, we see at least an advantage in the Nordic region in the new year.”

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