In short, last week, Chinese startup DeepSeek unveiled its artificial-intelligence ("AI") model called "R1." And since then, experts have trumpeted it as a big breakthrough in the space...
DeepSeek's AI model reportedly works as well as the newest version of OpenAI's ChatGPT. And the company says it trained the model in only two months and at a much lower cost.
Even if that's an exaggeration, it's still a huge deal...
It means that AI-model training is getting more efficient. And right now, China is ahead.
That brings us to the latest news out of China...
Put simply, the country just fired another big shot in the AI arms race.
One of China's biggest businesses released a new version of its own AI model yesterday. And the company claims that it surpasses both DeepSeek's R1 and OpenAI's ChatGPT.
As I'll explain today, U.S. investors like us should be paying close attention...
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The company I'm talking about is Alibaba (BABA).
If you're not familiar with Alibaba, it's one of the most powerful companies in China. You can think of it like Amazon (AMZN)...
The company is an e-commerce giant. And like Amazon, it also provides cloud services and other technology solutions.
In the U.S., Alibaba's shares trade on the New York Stock Exchange. The company's market cap is about $230 billion today. That puts it in the top 50 most valuable businesses globally.
I want to make a couple points about Alibaba's big announcement...
First, the company's new AI model is called "Qwen 2.5."
The "2.5" in the name means that Alibaba has released previous versions of its AI model. And like OpenAI and DeepSeek, it's constantly working to make the technology better.
My second point is about the timing...
Alibaba unveiled its latest AI model on the first day of the Lunar New Year. That's like a company in the U.S. releasing a new product on Christmas Day.
In China, most of the country is off work right now. So it's an unusual time for big news.
In the end, it's clear...
U.S. companies aren't the only ones feeling the pressure from DeepSeek. Alibaba's announcement came on a holiday. That tells us Chinese businesses are feeling the heat, too.
The competition in the AI space is intense right now. This arms race is only beginning.
Here's where the Power Gauge enters the story...
You see, our one-of-a-kind system turned "bullish" on Alibaba last Friday. This change happened just days before the company's big announcement. Take a look...
Now, I'm not saying that the Power Gauge can predict the future. Rather, as regular readers know, the system points us toward "what" to look at. And the "why" often comes out later.
In this case, Alibaba's big announcement fits the bill.
That doesn't mean you should rush out and buy the company's stock today.
It's more about the big picture. These back-to-back announcements from Chinese businesses are telling...
We're in the middle of the AI arms race.
Some of the world's most powerful companies are trying to one-up each other. They're making advancements with the technology almost every day.
In the end, AI will become more accessible and powerful than ever before.
This megatrend will make major waves in the stock market in the months and years ahead. Importantly, the Power Gauge will help us spot the winners and avoid the losers.
If you've been skeptical about AI so far... now is the time to start taking it seriously.
Good investing,
Vic Lederman
Market View
Major Indexes and Notable Sectors
# Hld: Bullish Neutral Bearish
Dow 30
-0.27%
10
13
7
S&P 500
-0.45%
97
243
158
Nasdaq
-0.19%
28
44
28
Small Caps
-0.23%
413
1034
457
Bonds
-0.2%
— According to the Chaikin Power Bar, Small Cap stocks and Large Cap stocks remain somewhat Bearish. Major indexes are mixed.
* * * *
Sector Tracker
Sector movement over the last 5 days
Communication
+2.64%
Health Care
+2.45%
Staples
+2.24%
Financial
+1.73%
Discretionary
+0.4%
Materials
-0.16%
Real Estate
-0.32%
Industrials
-1.75%
Utilities
-2.02%
Energy
-2.27%
Information Technology
-4.0%
* * * *
Industry Focus
Transportation Services
9
25
11
Over the past 6 months, the Transportation subsector (XTN) has outperformed the S&P 500 by +3.16%. However, its Power Bar ratio, which measures future potential, is Weak, with more Bearish than Bullish stocks. It is currently ranked #10 of 21 subsectors and has moved up 2 slots over the past week.
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