NVIDIA Slumps as Chinese AI Model Raises Market Concerns
Overview:
Stocks plunged on Monday, with Nasdaq futures briefly losing more than 5%, as investors expressed concerns over the potential threat posed by a low-cost artificial intelligence model developed in China.
NVIDIA's Plunge:
NVIDIA Corp. experienced a significant premarket decline of 12% in the US, poised for a record-breaking drop in market capitalization if sustained. The volume of Nasdaq 100 futures contracts traded was approximately four times higher than the 30-day average.
AI-Driven Rally Dampened:
The emergence of DeepSeek, a Chinese-developed AI model, raised questions about the sustainability of the AI-driven rally that has added $15 trillion to the Nasdaq 100 since 2022. Analysts expressed concerns about the potential impact on the valuations of technology companies.
European Equities Tumble:
In Europe, ASML Holding NV faced a 10% decline, the steepest selloff since October, dragging down the Stoxx 600, which fell 0.6%.
Power Stocks Impacted:
Power stocks, typically less volatile, declined on concerns of reduced electricity demand from AI data centers. Constellation Energy Corp. and NRG experienced drops of 13% and 10%, respectively.
Geopolitical Tensions:
President Trump's recent dispute with Colombia over tariffs also contributed to the bearish sentiment in the market. The deal's abrupt reversal led to concerns about the volatility of such announcements.
Earnings in Focus:
Technology stocks remain a focus as four of the "Magnificent Seven" (Apple, Microsoft, Meta, Tesla) announce their earnings this week. Europe also faces a busy earnings period, with companies representing 21% of the Stoxx 600 Index's value scheduled to report.
Mixed Reaction in Asia:
AI-related stocks in mainland China reacted positively, with Merit Interactive Co. surging to its daily limit. Hong Kong's Hang Seng Tech Index climbed as Lunar New Year approaches.
Key Market Movements:
* S&P 500 futures declined 2.2%
* Nasdaq 100 futures fell 3.8%
* Dow Jones Industrial Average futures dropped 0.9%
* Stoxx Europe 600 fell 0.5%
* MSCI World Index remained unchanged