I anticipated writing this commentary on Trump's first week in office – not that it hasn’t been worthy of comment, there has been a lot of activity, and he’s certainly hit the ground running. Executive Orders running into the 100s have set the tone of his presidency, but this has been widely covered in the press and most of his actions have not been a complete surprise.

Then Deep Seek happened, and the whole investing world changed overnight. Could this obscure Chinese company really have achieved for a few million dollars what American companies had spent billions creating? It seems on the face of it, the answer is yes. This has put into question the whole theme of AI infrastructure investment. Investors were on tenterhooks to hear what Microsoft and Meta had to say about their capex plans on their quarterly results on Wednesday, given the seismic shift in the cost of making AI happen. They did not disappoint on capex plans, but questions still remain – is the genie out of the bottle? Is this just another expression of Moore’s Law which decrees that costs halve as efficiency booms?

We had been investors in many companies with exposure to AI infrastructure. Yet Deep Seek claims to have similar efficacy to existing models at 90% of the cost that was assumed to be necessary just last week; and so, for this reason, we have reduced our exposure to this theme, preferring to see how the dust settles rather than doubling down on this fast-evolving space.

Then I thought Wednesday’s Federal Reserve meeting might be an interesting topic to discuss, but this too surprised many by being a complete non-event. The expectation was for no change to rates, and this was indeed what happened, but as an event seemed to garner practically zero interest from market participants, such was the impact from Deep Seek just two days earlier.

And then, from my perspective, we had the most interesting piece of a packed week. The market action on Monday may well turn out to have been pivotal. Despite the fact that Monday was a ‘Black Monday’ for the semi-conductor industry, specifically for Nvidia which was -17% that day, the rest of the market performed very well. Despite the S&P 500 closing -1.4%, 70% of index constituents were positive, for an average gain of 2%. The ratio of gainers to fallers was over 2:1, and we haven’t witnessed such a divergent market for a very long time. This shows that the underlying health of the market is very strong and that the weakness was confined to one thematic subsector.

It's early days, but this broadening strength at the expense of the mega caps could lead to sustained new leadership from other parts of the market. If sustained, this offers a great opportunity for active funds like the VT Tyndall North American Fund which focuses on new leadership, and we look forward to the next phase of this dynamic market.