Apple ( NASDAQ:AAPL ) and Meta Platforms ( NASDAQ:META ) just flipped the script on a brutal AI sell-off, while Apple jumps more than 3.7% and Meta climbs 0.6% today's early afternoon, while the rest of Big Tech took a beating. The trigger? Chinese AI upstart DeepSeek unveiled a shockingly cost-effective AI model, sending ripples through the industry. Apple investors took it as a winsmaller, more efficient AI models mean better on-device AI for iPhones. Meanwhile, Meta's Mark Zuckerberg isn't backing down, signaling up to $65 billion in AI investments this year as the company races to build out its Llama model.

Adding fuel to Apple's rally, JPMorgan raised its iPhone build estimates for 1H25, citing better-than-expected demand out of China. The firm now expects Apple to churn out 48 million iPhones in Q1 2025, an 8% jump from previous forecasts, thanks to stronger orders for the upcoming iPhone SE4. Still, Apple's stock is 12% off its recent highs, weighed down by iPhone sales concerns and fresh downgrades from Jefferies and Loop Capital. All eyes are now on Apple's January 30 earnings report, where analysts are betting on a $126 billion quarterjust ahead of consensus.

But the real shocker? DeepSeek just rewrote the AI investment playbook. Its latest model reportedly cost just $5.6 million to trainpeanuts compared to OpenAI's $100 million bill for GPT-4. That's spooking investors in AI infrastructure-heavy plays like Nvidia ( NASDAQ:NVDA ), Broadcom ( NASDAQ:AVGO ), Microsoft ( NASDAQ:MSFT ), Google ( NASDAQ:GOOG ), and Amazon ( NASDAQ:AMZN ), all of which tumbled as fears of AI cost deflation spread. The question now: Have the hyperscalers overplayed their hand, pouring billions into an AI arms race that might not be as expensive as everyone thought?

This article first appeared on GuruFocus .