Nasdaq Plunges Due to AI Advancements
January 27, 2025
The Nasdaq Composite (NQ=F) suffered a significant decline on Monday, sinking over 3% amidst concerns about US leadership and profitability in artificial intelligence (AI). The drop was sparked by the emergence of DeepSeek, a Chinese startup that claims to have developed an AI model using cheaper chips and less data than leading American models.
AI Bellwethers Tumble
Nvidia (NVDA), a bellwether in the AI sector, took a heavy hit, plunging nearly 17%. Other chip-related stocks also experienced losses, including ASML (ASML), Broadcom (AVGO), and Micron Technology (MU).
Investors Seek Defensive Stocks
Amidst the tech sell-off, investors flocked to defensive stocks, including Apple (AAPL) and software giant Salesforce (CRM). Shares of these companies bucked the trend and rose.
Treasury Yields Fall
The 10-year Treasury yield (^TNX) dropped as much as 12 basis points to 4.50%, the lowest level in over a month. Haven currencies, such as the yen and the Swiss franc, also gained ground.
Fed Meeting on Tap
The Federal Reserve will hold its first policy meeting of 2025 this week. Market participants are closely watching for any potential rate adjustments or guidance on interest rate policy.
Trade War Concerns Resurface
Trade war concerns were reignited over the weekend due to a stand-off between President Trump and Colombia. Trump threatened to impose 25% tariffs on Colombian goods over a dispute involving deported migrants. However, the tariffs were later put on hold after a deal was reached.
Big Tech Earnings Season Begins
The big tech earnings season kicks off this week with results from Apple, Meta (META), and Microsoft (MSFT). Investors will be paying close attention to guidance on future profit and the impact of DeepSeek on demand for AI-related products and services.