Today’s sell-off in AI-linked stocks, triggered by the emergence of China’s DeepSeek and its cost-efficient R1 model, has sent the tech market spinning. While the headlines might suggest doom and gloom for major players like Nvidia (NASDAQ: NVDA) and Applovin Corp (NASDAQ: APP), savvy traders say this could be a golden buying opportunity in a recalibrating AI sector.
Even though you can’t buy DeepSeek stock directly, it has sent shockwaves through the market, creating ripples that traders like me have learned to capitalize on. Stocks such as MicroCloud Hologram (NASDAQ: HOLO), a known penny stock player, jumped on the hype by issuing a press release claiming plans to integrate DeepSeek’s R1 into their holographic AI applications.
Predictably, this kind of “penny stock PR play” generated a premarket pop. I traded HOLO twice this morning and walked away with some solid small gains by focusing on quick, disciplined trades.
If you’re navigating this volatile AI wave, here’s what you need to know:
The DeepSeek AI Frenzy
Chinese AI startup DeepSeek unveiled its R1 model, claiming it rivals leading models like OpenAI’s GPT-4 at a fraction of the cost. Market skepticism is warranted, given the vague details around its development and the questionable economics of its reported $5.57M training cost. However, that didn’t stop DeepSeek from overtaking ChatGPT as the most downloaded app on the Apple Store.
This announcement rattled major U.S. tech stocks today. Nvidia, the backbone of current AI hardware, plunged 13%, with others like Google and Tesla shedding between 3% and 6%. Investors are questioning whether U.S. firms’ heavy spending on AI infrastructure is sustainable in the face of this low-cost competition.
HOLO: A Penny Stock Riding the DeepSeek Hype
In the penny stock world, MicroCloud Hologram (NASDAQ: HOLO) wasted no time in leveraging the DeepSeek frenzy. HOLO issued a press release this morning announcing plans to integrate DeepSeek’s R1 into its holographic AI applications. While such PR plays often lack substance, they can generate explosive short-term moves, which is exactly what happened today.
- HOLO spiked to $3 in premarket trading after closing at $1.55 yesterday, only to dip back down to $1.84 by 11 a.m.
- I executed two trades during the morning hype:
- $518 profit (starting stake $8,658) on a quick premarket buy at $2.34 and sell at $2.48.
- $950 profit (starting stake $12,350) on a dip buy at $2.47 for a bounce to $2.66.
These trades illustrate the importance of reacting to price action rather than trying to predict the future. HOLO is a classic penny stock pump that thrives on market headlines. While it’s tempting to hold out for larger gains, my approach focuses on singles—small wins that add up over time.
KEY TO THIS MARKET: Singles are the key guys, I'm selling $KAVL $RSLS $RR too early every time it seems but nice nearly +$3k day for me playing extra-safe, understand?! And also using https://t.co/6cuTVNHVBf from @StocksToTrade as they are on fireeeee with their alerts lately!
— Timothy Sykes (@timothysykes) September 23, 2024
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The Bigger Opportunity: Buying the Dip in Overinflated Tech Stocks
Beyond penny stocks, the broader sell-off in AI-heavy tech stocks could present a lucrative opportunity for traders with a disciplined approach. While Nvidia isn’t a penny stock, my 7-Step Pennystocking Framework applies just as well to these larger, overinflated plays.
Remember this chart well, its the basis for my 7-step framework, @30DayBoot & @completepenny & you must study not to fall prey to greed/ignorance or you'll get wrecked like 90% of traders. It's VITAL to sell into excessive strength/hype, do not just hold & hope like most newbies pic.twitter.com/QsAGHsI6lp
— Timothy Sykes (@timothysykes) February 28, 2021
- Massive Panic = Opportunity: Stocks like NVDA, APP, and Arm Holdings (NASDAQ: ARM) are seeing steep declines due to fears of DeepSeek’s low-cost disruption.
- Identify the Catalyst: DeepSeek’s AI announcement sparked a massive sell-off in AI-linked tech stocks.
- Look for Overreaction: The market often overreacts to news, especially when it’s based on unverified claims.
- Plan Your Entry: NVDA’s 13% drop could set up a strong bounce if the market realizes DeepSeek isn’t a credible long-term threat.
- Manage Risk: Big tech stocks can move fast, so set tight stop losses to protect your account.
- Take Profits into Strength: Don’t get greedy—lock in gains as the stock rebounds.
Lessons From HOLO and NVDA: React, Don’t Predict
Whether you’re trading penny stocks like HOLO or big names like NVDA, the principles remain the same: react, don’t predict. The market’s job is to constantly price in new information, and as traders, our job is to spot the inefficiencies and capitalize on them.
For HOLO, the inefficiency came from a hyped-up press release that temporarily inflated the stock price. By focusing on the price action and taking quick profits, I avoided getting caught up in the inevitable pullback. For NVDA, the inefficiency lies in the market’s overreaction to a potential competitor whose long-term impact is still unclear.
Both scenarios highlight the importance of staying disciplined and sticking to a strategy. The market is full of opportunities, but it’s up to you to identify them and execute with precision.
Final Thoughts: The AI Wave Is Just Beginning
The sell-off triggered by DeepSeek’s R1 model is just another chapter in the larger AI story. While headlines today are focused on China’s potential disruption, the long-term growth of AI as an industry remains intact. Companies like Nvidia and Microsoft have spent billions building the infrastructure to support this revolution, and those investments won’t evaporate overnight.
As traders, it’s important to zoom out and remember that volatility creates opportunity. Whether it’s trading penny stocks like HOLO on short-term hype or buying the dip in overinflated tech giants like NVDA, the key is staying adaptable and disciplined.
This is a market tailor-made for traders who are prepared. AI penny stocks thrive on volatility, but it’s up to you to capitalize on it. Stick to your plan, manage your risk, and don’t let FOMO drive your decisions.
These opportunities are fast and unpredictable, but with the right strategy, you can make them work for you.
I recommend that you pay close attention to the first days of this possibly historic bull market.
If you want to know what I’m looking for—check out my free webinar here!
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