The Post-DeepSeek Trade Isn’t Complicated By Lucas Downey, Contributing Editor, TradeSmith Daily By now you’ve heard the news causing all kinds of havoc on tech stocks. DeepSeek made headlines after announcing its AI large language model wasn’t only comparable to big players like ChatGPT, but its development costs were only a fraction of the hyperscaler spending we’ve learned to accept. News like this caused Wall Street to sell first and ask questions later. High-performance semiconductor firms were battered. A case in point is the VanEck Semiconductor ETF (SMH), which houses stalwart chipmaker names, shed nearly 10% on Monday, its largest single-day decline since the COVID lows of March 2020. But is now the time to duck and hide? Should we accept the fearmongering narrative the media is pushing about DeepSeek’s threat? Nah. For me, this sell-off had all the makings of an overheated group looking for an excuse to take long-overdue profits. You can bet forced selling took place. Just don’t follow the crowd on this one. History shows how moments like now, while painful to sit through, come with the investing territory. But it also shows a great bullish setup for those willing to investigate evidence-rich analysis. Today we’ll cover the latest semiconductor situation… Then we’ll offer a data-backed signal study that points to upside after these big washouts… …and one investment idea to keep on your radar for 2025. | Recommended Link | | | | We’re offering you one free year of access to the new “Green Day” system that’s caught the attention of our entire industry this year. It’s a new way to foresee the biggest jumps on 5,000 stocks – to the day – with 83% backtested accuracy. Already, a model portfolio based on our breakthrough system would’ve turned every $10,000 into $85,700 in studies, crushing the S&P 500 by an average of 99%. Click here to review the full details, before it goes offline. |  |
Semiconductors Make a Four-Month Low One of the bright spots of the past few years, semiconductors, is blushing. In fact, the group fell to levels last seen in September. If you’re holding any massive winning AI names, no doubt you felt a bruising on Monday. Below shows the steep pullback, with SMH dropping to $235: 
And this basket houses some of the top brass in the chipmaker space, including Nvidia (NVDA), Taiwan Semiconductor (TSM), and Broadcom (AVGO). Those three names alone comprise 39% of the whole basket! And I’ve been on record many times discussing how important these companies are to the tech space… And last summer I included a pullback signal study on Nvidia specifically. Big dips on outlier stocks can be profitable. Turns out, that’s the case with ETFs too. Semiconductors are a buy. Here’s why… What Happens After the SMH ETF Falls 9% or More in a Single Session The 9.8% thrashing SMH took on Monday had me look back to see previous similar instances. Is there a signal? YES. I was able to cull together nine prior daily drops of 9% or more going all the way back to 2000. Here’s what happens next: - Three months later, SMH jumps 10.1%
- Six months after, chipmakers crank 11.4%
- 12 months takes the cake with an average gain of 33.9%
Now, clearly the winning percentage isn’t super high, with only a 66% win-rate a year later. However, the only one-year losses came during 2000 and 2001 during the dot-com bust. That’s clearly not where we are today. From 2002 and later (six instances), SMH is positive in all signals, with average gains of 70.7%… Said another way, the opportunity could be huge right now. What I find most interesting about the DeepSeek revelation is that if AI development costs fall, that opens the door to new entrants. The barrier to entry isn’t as high as it once was… And that means new players will take the stage and help shape the next leg of the AI journey. Don’t miss it. Regards, Lucas Downey
Contributing Editor, TradeSmith Daily Note from Michael Salvatore, Editor, TradeSmith Daily: With the White House changing hands, master stockpicker Jason Bodner sees nothing but green lights for the AI trade. He built a unique system that leads him to countless fast-growing plays in AI. One recent pick, under-the-radar AI company Celestica (CLS), has already doubled from his recommended entry price back in June 2024. Jason is convinced that 2025 will be yet another year of outstanding gains in small- and mid-cap AI companies… the exact types of stocks his system is designed to find. And his premium stockpicking advisory, Quantum Edge Pro, is an essential resource for this trend. Right now, Jason’s opened up membership to Quantum Edge Pro at a special price for anyone who understands how powerful this trend is, and why acting now is so important. Click right here for all the details. | 
