Even as Middle East investors, including large institutional investors and family offices, are scrambling to quickly reshuffle their investment portfolios in the wake of the Chinese AI startup DeepSeek-triggered stock market bloodbath, market experts advised calm and diversification as the best strategies to tide over the current roller-coaster.
They also suggested using ETFs (Exchange-Traded Funds)-route for broader exposure to mitigate risks in the current market scenario.
Market participants said investors in the Middle East also resorted to panic selling in tech shares, especially in AI-focussed Nvidia, Microsoft, and Meta, in the wake of DeepSeek’s rise sending shockwaves through the AI investment landscape.
The Chinese AI startup’s latest large language model (LLM), said to have been developed for just around $6 million compared to the hundreds of millions or even a billion others spend, matches the performance of US leaders like OpenAI.
“In times of market turbulence, the key is to take a strategic, long-term approach rather than reacting emotionally,” said Jacob Falkencrone, Chief Investment Strategist – Europe at Saxo Bank.
“For investors, the key is to stay calm, diversify, and focus on the bigger picture,” he said.
Falkencrone also suggested the ETFs-route for investments as they provide an easy and efficient way to participate in AI’s growth without the risks of single-stock dependency.
“AI isn’t just here to stay; it’s evolving into something even bigger. By staying disciplined and strategic, investors can position themselves to benefit from this exciting investment theme,” he said.
US stock futures and European shares steadied on Tuesday, after the previous day’s dramatic, tech-led selloff, leading to an estimated $600 billion wipe-off in the market capitalisation of Nvidia, the world’s largest AI chipmaker.
US President Donald Trump has called the rise of Chinese company DeepSeek “a wake-up call” for the US tech industry, but Sam Altman, CEO of OpenAI, spoke in favour of the Chinese AI startup.
AI remains a solid long-term investment theme
Market experts said despite the turmoil and uncertainty with DeepSeek entering the picture, it is important to remember that AI remains a solid long-term investment theme.
They said diversification is crucial to managing risks in the fast-changing AI landscape, suggesting that investors should consider exposure across infrastructure, applications, and platforms in AI.
Vijay Valecha, Chief Investment Officer at Dubai-based Century Financial, said news on DeepSeek presently is at a very nascent stage.
“The markets would, therefore, have to wait for more clarity on how exactly the models were built at 5 per cent of the actual cost (being incurred by top US big tech names),” he said.
Valecha, however, said as the tech-heavy earnings season approaches, markets would always question the sky-high valuations of the top US names.
“DeepSeek news could be yet another panic-driven event in the market. Going forward much depends on how the actual earnings of these big tech names finally come in,” the Century Financial investment chief said.
He also pointed out that though China has always been a champion in providing goods and services at a low cost, at the same time, it has never killed or demolished the US dominance.
Cheaper models like DeepSeek’s could democratise AI
The Saxo Bank expert said though there is short-term volatility, the transformative potential of AI to reshape industries and drive innovation remains unchanged.
For investors who stay calm and focused, these turbulent times could even present opportunities, he said.
“Investors are worried about AI infrastructure spending and price wars. But, while the short-term market reaction seems concerning, the long-term outlook for AI remains robust,” Falkencrone said.
He also said cheaper models like DeepSeek’s could democratise AI, opening doors for smaller players to innovate.
“In short, the AI story isn’t over, it’s just evolving.”
Valecha said the latest developments arising out of China have rattled the core of US Big Tech’s existence.
He said the AI models from DeepSeek – especially its newly introduced R1 model – is said to be very apt and even better in some mathematical computational aspects vis-a-vis ChatGPT.
“The latest analysis by top US VC analysts even points out that this could be a massive breakthrough to revolutionise the entire global AI order,” the Century Financial investment chief said.
Sector experts said contrary to the widely-held perception that AI research and engineering are prohibitively expensive, the Chinese models from DeepSeek have proved that with an engineering cost fraction of what was deployed by ChatGPT, the AI models are still deployable and usable across the spectrum by managing resources properly.
The Saxo Bank expert, citing the Jevons’ Paradox – a popular concept named after economist William Jevons – said technological improvements in efficiency often lead to increased overall usage rather than reduced consumption.
“Historically, when steam engines became more efficient, coal consumption didn’t decrease – it surged because steam power became cheaper and more accessible. Similarly, in AI, cheaper models like DeepSeek’s could spark widespread adoption,” he said.
Falkencrone said as the cost of AI tools drops, more companies and industries will likely integrate AI into their operations, driving demand for AI infrastructure and applications.
“AI isn’t just a passing trend, it’s a transformative force reshaping industry,” he said, adding that DeepSeek’s innovations may lower barriers to entry, accelerating adoption and creating new opportunities.
“Market corrections are part of investing. Selling during dips not only leads to heavy losses, but prevents investors from benefiting when markets recover.
On the contrary, long-term investors who hold their positions are typically better positioned to capture future growth.
“Don’t panic, stay invested,” is Falkencrone’s advice to investors in the Middle East – as also globally.
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