Nasdaq Tumbles, Tech Stocks Battered by AI Fears

Key Takeaways

* The Nasdaq Composite plunged over 3% on Monday, led by a sell-off in tech stocks.
* Nvidia (NVDA) shares tanked nearly 17% amid concerns about the rise of cost-efficient AI models.
* Chinese startup DeepSeek's AI model, which uses cheaper chips and less data, has cast doubt on US AI dominance and investment prospects.
* Tech bellwethers Apple (AAPL), Meta (META), and Salesforce (CRM) bucked the trend, while the Dow Jones Industrial Average gained 0.6% on defensive sector support.

AI Frenzy Rattled

The Nasdaq's sell-off was ignited by concerns raised by DeepSeek's AI model. The Chinese startup claims its technology requires less infrastructure and cost than popular American AI models, prompting investors to question the extravagant investments made by US tech giants.

Nvidia Plummets

Nvidia, a leading chipmaker in the AI market, bore the brunt of the sell-off. The company's shares plunged nearly 17%, wiping out a record $589 billion in market value. Investors dumped AI-related stocks across the board, with ASML (ASML), Broadcom (AVGO), and Micron Technology (MU) also suffering significant losses.

Defensive Sectors Emerge

As the tech sector tanked, investors sought refuge in defensive sectors. The 10-year Treasury yield fell, making bonds more attractive. The yen and Swiss franc, traditional haven currencies, also surged.

Fed Meeting in Focus

The Federal Reserve will hold its first policy meeting of the year this week, with investors expecting the central bank to maintain its current stance. Any unexpected moves by the Fed could further impact market sentiment.

Earnings Season Kick-Off

Big Tech earnings season kicks off this week, with Apple, Tesla (TSLA), Meta, and Microsoft (MSFT) reporting results. Investors will closely watch their guidance on future profits in light of the DeepSeek concerns.