DeepSeek Developed Using OpenAI Data, Alibaba AI Model Better Than DeepSeek, ASML Surges On AI Orders

To gain an edge, this is what you need to know today.

AI Model Competition

Please click here for an enlarged chart of ASML Holding NV ASML.

Note the following:

• This article is about the big picture, not an individual stock.  The chart of semiconductor manufacturing equipment company ASML stock is being used to illustrate the point.
• The chart shows the gap up in ASML stock on release of earnings. ASML surged as it reported earnings and booking orders double expectations on AI related demand.
• RSI on the chart shows that ASML has bounced back from oversold conditions.
• The chart illustrates a very important point that we have been impressing upon investors regarding AI – a fortune is to be made in AI; it will not be in a straight line, and at times will be treacherous.  The chart shows that in the AI frenzy, the stock has traded as high as $1105.46.  Even though ASML is reporting record revenues on AI demand and the stock is up $36 as of this writing, the gap up is a mere blip on the chart.
• ASML is important because ASML has a near monopoly on extreme ultraviolet lithography equipment.  Without ASML equipment, advanced NVIDIA Corp (NVDA) chips could not be produced and there would be no AI.  A more diversified semiconductor equipment manufacturer is Applied Materials (AMAT).  As full disclosure, AMAT is in The Arora Report’s ZYX Buy Core Model Portfolio, long from $16.
• As full disclosure, The Arora Report has been awaiting an opportunity to add ASML to the portfolio.  A signal will be given when the stringent criteria of the ZYX Change Method are met.
• OpenAI's data may have been used to train DeepSeek without authorization.  Microsoft Corp (MSFT) and Open AI are investigating.
• Data from Meta's AI model also appears to have been used in DeepSeek.
• Chinese e-commerce giant Alibaba Group Holding Ltd – ADR (BABA) has introduced an AI model that is better than both OpenAI's model and DeepSeek's model.
• In a boost for Elon Musk, Apple Inc (AAPL) is working with T-Mobile Us Inc (TMUS) to provide Starlink on iPhones.  T-Mobile is also reporting blowout earnings, the best ever to start a new year.  As full disclosure, TMUS is in The Arora Report’s ZYX Buy Core Model Portfolio.  TMUS came to the portfolio at an average price of $12.54 when Arora Portfolio company MetroPCS was bought out, and the Arora call was to hold TMUS stock. 
• The FOMC rate announcement will be made at 2pm ET, followed by Powell's press conference at 2:30pm ET.
• In The Arora Report analysis, the data does not support a rate cut. We will be carefully listening to Powell's press conference for clues on what the Fed may do in the March 18 – 19 meeting.
• Prudent investors need to know that bond traders are putting on big positions betting that a big bond rally is about to start.  If bond traders are right, a bond rally will be positive for stocks.  However, keep in mind that in The Arora Report analysis, a big bond rally is not the highest probability scenario.  
• Important earnings ahead today include Microsoft (MSFT), Meta Platforms Inc (META), and Tesla Inc (TSLA).  We will be carefully listening to the conference calls for clarity on capital expenditure plans after DeepSeek.
• In The Arora Report analysis, today may be a high volume day in the markets, which can bring volatility.
• The data indicates that consumer confidence is beginning to pullback.

Magnificent Seven Money Flows

In the early trade, money flows are positive in Amazon.com, Inc. (AMZN), Alphabet Inc Class C (GOOG), and META.

In the early trade, money flows are negative in AAPL, NVDA, MSFT, and TSLA.

In the early trade, money flows are neutral in SPDR S&P 500 ETF Trust (SPY) and Invesco QQQ Trust Series 1 (QQQ).

Momo Crowd And Smart Money In Stocks

Investors can gain an edge by knowing money flows in SPY and QQQ.  Investors can get a bigger edge by knowing when smart money is buying stocks, gold, and oil.  The most popular ETF for gold is SPDR Gold Trust (GLD).  The most popular ETF for silver is iShares Silver Trust (SLV).  The most popular ETF for oil is United States Oil ETF (USO).

Bitcoin

Bitcoin BTC/USD is range bound.

Protection Band And What To Do Now

It is important for investors to look ahead and not in the rearview mirror.  The proprietary protection band from The Arora Report is very popular.  The protection band puts all of the data, all of the indicators, all of the news, all of the crosscurrents, all of the models, and all of the analysis in an analytical framework that is easily actionable by investors.

Consider continuing to hold good, very long term, existing positions. Based on individual risk preference, consider holding Consider continuing to hold good, very long term, existing positions. Based on individual risk preference, consider a protection band consisting of cash or Treasury bills or short-term tactical trades as well as short to medium term hedges and short term hedges. This is a good way to protect yourself and participate in the upside at the same time.

You can determine your protection bands by adding cash to hedges.  The high band of the protection is appropriate for those who are older or conservative. The low band of the protection is appropriate for those who are younger or aggressive.  If you do not hedge, the total cash level should be more than stated above but significantly less than cash plus hedges.

A protection band of 0% would be very bullish and would indicate full investment with 0% in cash.  A protection band of 100% would be very bearish and would indicate a need for aggressive protection with cash and hedges or aggressive short selling.

It is worth reminding that you cannot take advantage of new upcoming opportunities if you are not holding enough cash.  When adjusting hedge levels, consider adjusting partial stop quantities for stock positions (non ETF); consider using wider stops on remaining quantities and also allowing more room for high beta stocks.  High beta stocks are the ones that move more than the market.

Traditional 60/40 Portfolio

Probability based risk reward adjusted for inflation does not favor long duration strategic bond allocation at this time.

Those who want to stick to traditional 60% allocation to stocks and 40% to bonds may consider focusing on only high quality bonds and bonds of five year duration or less.  Those willing to bring sophistication to their investing may consider using bond ETFs as tactical positions and not strategic positions at this time.

The Arora Report is known for its accurate calls. The Arora Report correctly called the big artificial intelligence rally before anyone else, the new bull market of 2023, the bear market of 2022, new stock market highs right after the virus low in 2020, the virus drop in 2020, the DJIA rally to 30,000 when it was trading at 16,000, the start of a mega bull market in 2009, and the financial crash of 2008. Please click here to sign up for a free forever Generate Wealth Newsletter.