The S&P 500 has rebounded from the heavy losses skilled on Monday (27 January). However the world’s most generally adopted share index isn’t out of the woods simply but.

Whereas volatility has calmed because the week’s rolled on, concern over tech shares’ profitability — and extra particularly these within the synthetic intelligence (AI) area — stays on the entrance of buyers’ minds.

May the S&P 500 be about to crash?

Deep hassle?

To recap, the S&P 500 nosedived on Monday following contemporary information on DeepSeek, a Chinese language startup that’s growing its personal AI system to rival these developed within the US.

DeepSeek’s been round for some time, however efficiency knowledge from its R1 mannequin has simply blown trade consultants’ socks off. Testing knowledge exhibits efficiency akin to that of current AI methods like OpenAI’s o1. Nevertheless, DeepSeek has achieved this at considerably decrease value.

If these findings maintain, there could also be important implications for the worldwide AI panorama. From offering direct competitors to established system operators like OpenAI and Google, to impacting demand for high-power laptop chips, DeepSeek’s developments may drive main modifications in market dynamics, and with it expectations of hovering income throughout the US tech sector.

What subsequent?

Given the S&P 500’s giant weighting of expertise shares, it’s simple to see why the index slumped. At the beginning of 2025, tech giants like Nvidia, Microsoft, Apple, Meta, and Alphabet made up simply over 30% of the S&P’s complete market capitalisation.

Their share price features final yr, which have been constructed on hopes of booming AI-related income, have come underneath critical scrutiny. Even after Monday’s washout, many tech names nonetheless command sky-high valuations.

But regardless of this, the possibilities of a full-blown market crash look (for the second a minimum of) fairly low. Disruption has lengthy been a standard theme throughout the tech sector. As well as, R1 has to this point has not reached the unreal common intelligence (AGI) stage, and might solely be used for slim duties. It’s attainable that disruption to present AI assumptions is not going to be as extreme as thought.

It’s additionally vital to do not forget that DeepSeek’s mannequin may enhance earnings and money flows throughout the S&P 500 if it revolutionises AI growth.

For system builders, the expense of growing and working these methods could also be decrease transferring forward. In the meantime, giant swathes of the S&P 500 may gain advantage from extra reasonably priced AI options that considerably convey down prices.

Right here’s what I’m doing

I proceed to stay optimistic over the US tech sector and, by extension, the S&P 500. In addition to AI, different tech phenomena like cloud and quantum computing, autonomous autos, and cybersecurity provide important progress alternatives.

However fairly than placing all my eggs in the identical basket, I feel a diversified strategy is one of the best ways to speculate. The iShares S&P 500 Info Expertise Sector ETF (LSE:IUIT) is a prime exchange-traded fund (ETF) I maintain in my very own portfolio and suppose buyers ought to take into account.

With money unfold throughout 69 firms, it offers me publicity to the entire progress alternatives talked about above. These embrace semiconductor producers, software program builders, IT consultants, and communications gear suppliers.

These are early days within the AI revolution, so a crash that pulls this fund (and the broader S&P 500) decrease can’t be dominated out. However on steadiness, I feel the outlook for the US tech trade stays extraordinarily vibrant.