Scottish Mortgage (LSE: SMT) shares have had a blistering run. Yet it looked like the fun might stop when cut-price Chinese AI upstart DeepSeek popped up.
The fact that DeepSeek could deliver a product that apparently matched ChatGPT on a shoestring budget sent shockwaves through the S&P 500.
Chipmaker Nvidia crashed by $600bn on 27 January, the largest one-day drop in US stock market history. The US is pouring trillions into AI, money ill-spent if China can do the same job for pennies.
That was a blow to Scottish Mortgage too. The FTSE 100 investment trust is a huge play on the US mega-caps and disruptive tech generally. Amazon, Meta Platforms and Nvidia itself number among its top 10 holdings. And Taiwan Semiconductor Manufacturing is in its top 15.
This FTSE 100 stock bounced back
The Scottish Mortgage share price also fell on 27 January, a drop of 5% from 1,059p to 1,004.5p. It could hardly do anything else.
I thought that was modest. Nvidia plunged 17%. I expected further volatility in the days that followed, but was in for another surprise.
The Scottish Mortgage share price bounced straight back, to 1,090p. That’s above its pre-dip price. If anybody had been nippy enough to take advantage of the sell-off, they’d be sitting on a return of 8.5%. If they’d pumped in £10,000, that would be worth £10,850 before charges.
They’d have had to be fast though. I suspect most were sitting back, dazed, wondering what all this might mean. I was.
At The Motley Fool, we think timing the market is a mug’s game. But we’re not against taking advantage of a market dip to buy cut-price stocks. The aim then is to sit back and hold for the long term, rather than carry on trading for short-term gain.
I’d have held on to my Scottish Mortgage shares even if they’d taken a far bigger beating and taken a lot longer to fight back. I’m glad they didn’t though.
Nvidia has further to go
Nvidia is on the up too. It’s also climbed 8.5% since slumping to around $118 on 27 January. But at $128 it’s well below its recent peak of $147.
Sell-offs are to be expected when investing in shares, especially high-growth ones.
Scottish Mortgage crashed by half in 2022, when we saw a far bigger sell-off. Despite that, it’s still up 75% over five years. Over 12 months it’s grown 40%.
The Magnificent Seven US tech stocks surely can’t ride roughshod over their rivals forever. There’s always a surprise out there. With inflation still a menace, and US interest rates likely to stay high, they may struggle to grow from here. Donald Trump’s trade tariffs are a threat too. The Chinese may have more tricks up their sleeve.
Yet I won’t be selling. The trust plays an important role in my portfolio, giving me diversification from FTSE 100 dividend stocks, my main focus. They’re having a moment right now. As ever, diversification is the best defence.
The post £10k invested in Scottish Mortgage shares after the DeepSeek crash is now worth… appeared first on The Motley Fool UK.
We think earning passive income has never been easier
Do you like the idea of dividend income?
The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?
If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…
Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.
What’s more, today we’re giving away one of these stock picks, absolutely free!
Get your free passive income stock pick
More reading
£5k in savings? Here is how an investor might target a £354 monthly passive income
Up 68%! Here’s 1 FTSE 100 high-flyer with an eye on the future
£20,000 invested in Scottish Mortgage shares just 3 months ago would now be worth…
£5,000 invested in Scottish Mortgage shares 6 months ago is now worth…
2 cheap FTSE 100 stocks I think could keep rising in February!
Harvey Jones has positions in Nvidia and Scottish Mortgage Investment Trust Plc. The Motley Fool UK has recommended Nvidia. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
