Nasdaq Futures Tumble Amid AI Sell-off Sparked by Chinese Competition
Nasdaq futures plummeted on Monday as a Chinese AI model's popularity triggered a sell-off in AI-related stocks. Chipmaker Nvidia suffered the heaviest losses, with a 6.9% decline in premarket trading.
DeepSeek, a Chinese startup, has introduced a free AI assistant that challenges the prevailing belief in the financial markets that AI will boost demand throughout the supply chain.
Richard Hunter, head of markets at interactive investor, emphasized that it's too early to deem DeepSeek an existential threat to US-based AI solutions. However, he anticipates investors will reassess the potential impact on a burgeoning industry that has fueled significant growth in the main indices.
DeepSeek's AI Assistant surpassed ChatGPT in popularity on Apple's App Store in the US. Other chipmakers, such as AMD and Micron Technology, dropped by 3.7% and 6.4%, respectively. Microsoft and Meta Platforms each declined by 3.3%.
AI server manufacturers Dell Technologies and Super Micro Computer experienced an approximately 8% decline.
At premarket trading, Dow E-minis fell 1.06%, S&P 500 E-minis decreased 1.96%, and Nasdaq 100 E-minis lost 3.04%.
Global market concerns were also heightened by trade tensions between the US and Colombia. However, these tensions eased on Sunday when the US announced an agreement to accept military aircraft carrying deported Colombian migrants.
The Federal Reserve's interest rate decision is expected this Wednesday, with no anticipated changes. The personal consumption expenditures (PCE) reading will be released on Friday, providing insights into the inflation trajectory.
Despite a retreat on Friday, all three major indexes recorded weekly gains.