February 23, 2026 – China’s DeepSeek is back. The AI lab is preparing to release its newest model, V4. And Wall Street is already bracing for impact.
The timing couldn’t be worse for tech investors. Markets are already fragile. Tariff uncertainty, geopolitical risk, and Nvidia’s upcoming earnings are all weighing on sentiment. Now, DeepSeek is adding fresh pressure.
History Is About to Repeat Itself
This isn’t the first time DeepSeek has rattled markets. In January 2025, its R1 model triggered a historic sell-off. Nvidia plummeted nearly 17% in a single day, wiping roughly $600 billion in market value. The VanEck Semiconductor ETF tumbled nearly 10% and failed to recoup those losses over the following month.
Now, the sequel is arriving. And the stakes feel even higher.
What Makes V4 Different
DeepSeek V4 is reportedly more capable than its predecessors. Reports suggest it outperforms ChatGPT and Claude, particularly on tasks involving long coding prompts.
That’s a bold claim. But DeepSeek has a track record of delivering. Its R1 model leapfrogged rivals from Anthropic, Google, Meta, and xAI, all of which had access to far more advanced chips.
The core fear on Wall Street is simple: if DeepSeek can match U.S. models cheaply, massive AI spending looks unjustifiable.
The Market Is Already on Edge
Monday’s session offered a preview. The Dow fell more than 700 points. The S&P 500 declined 1%. The Nasdaq Composite slid 1.1%.
Stocks face a wall of worry beyond DeepSeek. Trump’s shifting tariff agenda and rising geopolitical tensions are both in play. Nvidia’s quarterly results due this week add another layer of uncertainty.
The Bull Case: Efficiency Breeds Adoption
Not everyone is panicking. Some analysts argue that cheaper AI models accelerate adoption. More users means more compute demand, not less.
Jevons Paradox applies here: increased efficiency can lead to greater overall consumption. Lower costs could unlock a massive wave of enterprise AI adoption. That’s ultimately bullish for infrastructure spending.
The Bottom Line
DeepSeek V4 is a genuine wildcard. It could spark another sharp sell-off in semiconductor and AI-linked stocks. But history also shows these dips don’t last. Last year’s DeepSeek panic proved to be a buying opportunity for patient investors.
The key question isn’t whether markets will react. They will. The question is whether U.S. tech giants can defend their lead or whether DeepSeek is rewriting the rules of the AI race entirely.
