Good Morning! President Trump revealed that Microsoft is in talks to acquire TikTok and that he’d like to see a bidding war over the app. Starbucks is rolling out new policies under its new CEO, including panic buttons at some locations to handle angry customers.

Elon Musk’s DOGE is on a hiring spree, Scott Bessent was confirmed as Treasury Secretary, SoftBank-backed TravelPerk doubled its valuation to $2.7 billion, and Amazon’s Whole Foods CEO will now lead its grocery business.

Plus, return-to-office mandates are impacting everyone except for top performers, and 5 tips for staying focused when you're stressed.

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_{SQUEEZ OF THE DAY}

We're in DeepSeek 

Wall Street got blindsided yesterday when Chinese AI startup DeepSeek unveiled its latest model, DeepSeek-R1. This open-source AI reportedly matches the performance of leading models from OpenAI and Google but at a fraction of the development cost.

The announcement triggered a tech-sector sell-off, with Nvidia’s stock plunging nearly 17%, wiping out approximately $589 billion in market value, the largest single-day loss in U.S. history.

The news was so monumental that venture capitalist Marc Andreessen dubbed it “AI’s Sputnik moment,” comparing it to the shock of the USSR’s first satellite launch.

DeepSeek claims its R1 model used just 2,048 Nvidia H800 GPUs and, at a cost of just $5.6 million, has 671 billion parameters. For comparison, OpenAI and Google have spent billions to achieve the same results.

The craziest part? DeepSeek’s founder, Liang, achieved this despite U.S. export restrictions barring China from acquiring Nvidia’s most advanced chips. That it achieved remarkable results with significantly fewer resources has rattled confidence in Silicon Valley’s dominance.

Now, investors are asking whether the massive global investments in AI are justified. U.S. companies spent $224 billion on AI in 2023, with UBS projecting that number will hit $280 billion by 2025. Meta, OpenAI, and SoftBank alone have announced up to $500 billion in infrastructure investments over the next four years.

Of course, it’s a double-edged sword, with optimism that they may produce strong results at a fraction of the cost. President Trump called DeepSeek a "wakeup call" for American tech companies, while Nvidia praised it as “an excellent AI advancement.”

Takeaway: DeepSeek’s latest announcement isn’t without controversy. Analysts at Bernstein find it highly doubtful that DeepSeek matched OpenAI’s capabilities for $5 million, calling it “categorically false.” 

And others think DeepSeek may have cut corners by piggybacking on existing OpenAI models. But still - the AI race is vulnerable, and DeepSeek has investors rethinking how much of a lead U.S. companies really have.

_{PRESENTED BY MACABACUS}

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_HEADLINES

Top Reads

• Trump says Microsoft is in talks to acquire TikTok (CNBC)

• Trump says DeepSeek ‘should be a wake-up call’ for American tech (CNBC)

• Starbucks changes free refill policy, brings back condiment bars (Axios)

• Starbucks has a ‘panic button’ behind the counter for angry customers (Fortune)

• DeepSeek drops an image generator (TC)

• SoftBank-backed TravelPerk doubles valuation to $2.7 billion (CNBC)

• Spotify, UMG reach multiyear deal (YF)

• Scott Bessent wins Senate confirmation as Treasury secretary (CNBC)

• Whole Foods CEO takes Amazon role (CNBC)

• 2025 will likely be another brutal year of failed startups (TC)

• Elon Musk's DOGE makes another hiring push (Fox)

• Is Netflix morphing into cable? (Verge)

• U.S. efforts to restrict China from Nvidia’s chips may have backfired (CNBC)

• Activist attacks US Steel merger (YF)

• Apple turns its AI on by default in latest software update (CNBC)

• SpaceX to launch rocket with internet-beaming satellites (Fox)

• RTO for everyone but top performers (WSJ)

_{CAPITAL PULSE}

Markets Rundown

Tech-Heavy Nasdaq Sells Off on Monday

U.S. equity markets closed mixed on Monday, with the Nasdaq falling over 3%, the S&P 500 down more than 1.5%, and the Dow Jones finishing modestly higher.

The sell-off came amid reports that Chinese AI startup DeepSeek has developed a highly competitive large-language model for under $6 million, significantly less than the $60 billion AI spending plans of Microsoft and Meta this year. This has raised questions about whether U.S. tech giants need to improve efficiency.

However, DeepSeek’s cost estimates have yet to be confirmed.

The equity downturn also triggered a flight to safe-haven assets, pushing Treasury bond prices higher and easing yields.

The 10-year Treasury yield fell 0.10% to 4.52%, its lowest level of the year.

Meanwhile, the VIX volatility index, often called Wall Street’s fear gauge, surged over 18%, reaching its highest level in 2025.

U.S. Tech Firms Will Remain Global AI Leaders

Despite competitive concerns from Chinese firms like DeepSeek, U.S. technology companies are expected to maintain leadership in the global AI market. Their strong balance sheets, regulatory transparency, and investor confidence position them favorably.

However, AI remains a rapidly evolving and highly competitive space, and new players could push U.S. tech giants toward greater efficiency.

A potential response to DeepSeek’s advancements could come as early as this week, with Microsoft and Meta set to report earnings on Wednesday after market close.

Diversification Remains a Key Theme for 2025

Market leadership broadening remains a crucial theme for portfolio positioning in 2025. Investors may benefit from diversifying across sectors, asset classes, and market capitalization.

Sectors with more reasonable valuations not only have the potential to catch up over the next 12 to 24 months, but they may also provide a buffer during sell-offs, such as Monday’s decline in mega-cap technology stocks.

Movers & Shakers

• (+) AT&T Inc ($T) +6% after posting strong Q4 profit; strong increase in subscribers.

• (–) Nvidia ($NVDA) -17% because DeepSeek prompts questions about AI investment going forward.

• (–) Vistra Corp. ($VST) -28% after AI energy usage called into question because of new China AI lab.

Private Dealmaking

• Emerson Electric bought out remaining 43% stake in AspenTech for $7.2 billion

• Aptean bought supply chain software firm Logility for $482 million

• Atlas Energy Solutions bought Moser Energy Systems for $220 million

• Tive, a shipment monitoring solutions provider, raised $40 million

• Allara Health, a virtual care provider, raised $26 million

• Manas AI, a cancer drug discovery startup, raised $24.6 million

For more PE, VC & M&A deals, subscribe to our Buysiders newsletter.

_{BOOK OF THE DAY}

You Deserve To Be Rich

You deserve to be rich.

You deserve to make a purchase without fear that your check might bounce. You deserve to go on vacation. You deserve to care for loved ones without worrying about bills. You deserve to live the way you want, without reservations or fear. You deserve freedom—financial freedom. If you agree, you’ve come to the right place.

We grew up in New York playing basketball together. As kids, both of us were fascinated by finance, curious about the stock market and how money moves among systems and pockets. But we began to notice that—for people in our community—hard work wasn’t enough. The system wasn’t set up to help people like us turn our hustle into lasting wealth.

We started Earn Your Leisure to change that. We never could have imagined the response. Soon our little podcast started to feel more like a financial revolution. But a podcast can do only so much. This book is our answer to the thousands upon thousands of people who have asked us for a detailed blueprint. The key to earning your leisure is to see money as a strategic tool for wealth development.

“A revolutionary playbook for building generational wealth, no matter where you grew up.”

_{DAILY VISUAL}

_{PRESENTED BY ELF LABS}

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Imagine what would happen if you combine Disney-level IP with cutting-edge AI and VR tech (no headsets needed).

Meet Elf Labs. 

With 100+ historic trademarks featuring Cinderella, Snow White, and Peter Pan—and powered by 12 groundbreaking tech patents—Elf Labs is revolutionizing immersive entertainment with hyper-realistic 3D worlds and global licensed merchandise.

What’s more? They’re launching three franchises in 2025, backed by a team that's generated $6B+ in licensing deals. 

This is your last chance to invest in some of the highest grossing characters in history before the share price jumps. Invest today and claim 10% bonus shares.

_{DAILY ACUMEN}

Diet and Personality

We often think of personality as a fixed set of traits, but emerging research suggests it's more fluid than we realize.

The food we consume impacts not just our physical health, but also our gut microbiome, brain plasticity, and metabolic balance – all of which play crucial roles in shaping who we are. 

A diet rich in fiber, omega-3s, and antioxidants supports a healthy gut-brain axis, fostering emotional stability, adaptability, and resilience. 

Conversely, a diet high in processed foods, sugar, and unhealthy fats can disrupt this delicate balance, potentially contributing to irritability, anxiety, and even shifts in personality traits.

While the precise extent of dietary influence is still being explored, it's clear that nourishing our bodies with the right foods lays the foundation for not only physical well-being, but also a more positive and adaptable mindset. 

Consider your next meal not just as fuel, but as a potential building block for the kind of person you want to be.

_{ENLIGHTENMENT}

Short Squeez Picks

• 5 tips for staying focused when you're stressed

• 6 easy tasks for a more organized home

• 5 body language tips to win people over at work

• Why kids having chores is a neglected predictor of success and happiness

• 18 Excel hacks that will save you time and money

_{MEME-A-PALOOZA}

Memes of the Day