DeepSeek AI Disruption Shakes Nasdaq Funds and Dividend Stocks

Market turmoil ensues as DeepSeek's AI disrupts the tech sector, affecting stocks like QYLD. Investors must reconsider the safety of these funds in light of recent losses and the competitive landscape.

Date: 06-02-2025

AI Rating: 4

**DeepSeek's Impact on ETFs and Tech Stocks**

The release of DeepSeek's AI technology has introduced volatility into the market, particularly affecting major tech stocks. With firms such as Nvidia (NVDA) and Microsoft (MSFT) facing significant drops in their stock prices post-DeepSeek's announcement, income-seeking investors must reassess the reliability of dividend offerings tied to these stocks.

**Nvidia's Dip**: Nvidia shares fell 16% in a week, primarily due to growing concerns that their chips may no longer be necessary for effective AI operations, as showcased by DeepSeek's more efficient technology. Such a drastic downturn raises question marks about the long-term viability of stock prices in this segment.

**Microsoft's Decline**: MSFT also suffered a 6.5% loss, exacerbated by its association with OpenAI and its heavy reliance on the AI powered by Nvidia chips. This decline in MSFT can lead to potential effects on funds like QYLD, which hold a significant portfolio share in these companies.

**Named Companies in Focus**: Both NVDA and MSFT account for a cumulative 15.5% of the Nasdaq 100 Covered Call ETF (QYLD). The ETF's heavy reliance on these stocks could imply that dividend yields, which appear generous at 12.2%, might not be sustainable if these companies continue to face negative repercussions.

Apple (AAPL) faces similar scrutiny, with stagnant revenue growth of only 2.5% over the past three years. Given its standing as a major holding in QYLD, its performance adds additional risk to the ETF's stability.

**Dividend Outlook**: While the dividends may seem attractive, the underlying risk associated with the stocks informs the overall investment strategy. Given the current environment, where high volatility and newfound competition in AI technologies emerge, investors should diligently reconsider their positions in QYLD and other associated funds.

Stocks: QYLD NVDA MSFT AAPL SPY XYLD