Nasdaq Futures Lead Stock Rout as Chinese AI Startup Raises Concerns
KEY POINTS:
* Nasdaq futures plunged 4.3% on Monday, dragging down Wall Street stocks.
* Claims from China's DeepSeek about its cost-effective AI assistant rattled markets.
* Nvidia (NVDA) shares tumbled over 11% pre-market, with other tech stocks also suffering losses.
* DeepSeek's claims raise questions about AI demand-driven growth projections.
* Investors await Big Tech earnings this week, with concerns over DeepSeek's impact on valuations.
DETAILS:
Markets were shaken by reports that Chinese firm DeepSeek's AI model achieves comparable performance to leading models using cheaper hardware and less data. This has triggered a reassessment of bets on AI-fueled stock growth.
Nvidia, a leading AI chipmaker, bore the brunt of the sell-off, with shares plummeting over 11%. Other tech stocks, including ASML, Arm, and Micron Technology, also took significant hits.
Meta and Microsoft both lost around 6%, reflecting concerns about their hefty AI investments. Tesla and Amazon also declined as tech stocks across the board were sold off.
Investors are now eagerly awaiting Big Tech earnings this week, with results from Apple, Tesla, Meta, and Microsoft set to be released. Guidance on future profitability will be closely scrutinized in light of DeepSeek's claims.
Meanwhile, trade war concerns resurfaced after a dispute between President Trump and Colombia over deported migrants. Trump initially threatened tariffs before pausing them after a deal was reached.
The incident highlights concerns that the president may continue to use tariffs as a tool to pursue policy goals. The Federal Reserve will hold its first meeting of the year this week, and officials are on alert for any sudden actions by Trump that could pose challenges.