Nasdaq Futures Plunge on AI Concerns
Nasdaq futures witnessed a dramatic decline on Monday, leading a stock market sell-off on Wall Street. The catalyst was a Chinese startup, DeepSeek, whose claims about its AI capabilities shook confidence in US leadership and profitability in the field.
Contracts on the tech-heavy Nasdaq 100 (NQ=F) plummeted 4.3%, while S&P 500 futures (ES=F) tumbled 2.4%. Dow Jones Industrial Average futures (YM=F) fell 0.9%, or about 380 points, following a positive week for the major indices.
DeepSeek's assertions that its AI assistant utilizes inexpensive chips and minimal data while delivering comparable performance have sent shockwaves through markets. Investors are reassessing their bets on AI-driven growth following a surge in DeepSeek's prominence.
AI industry bellwether Nvidia (NVDA) saw its shares plunge over 11% in pre-market trading, as chip-related stocks were heavily impacted. ASML lost 9%, with Arm (ARM), Broadcom (AVGO), and Micron Technology (MU) experiencing similar declines.
Amidst concerns over megacapitalizations' substantial AI investments, Meta (META) and Microsoft (MSFT) both slid approximately 6%. Tesla (TSLA) and Amazon (AMZN) also faced losses as tech stocks sold off.
Investors await the commencement of Big Tech earnings season this week, featuring results from Apple (AAPL), Tesla, Meta, and Microsoft. The focus will be on guidance for future profitability as DeepSeek raises doubts about revenue prospects.
Trade war apprehensions have resurfaced following a standoff between President Donald Trump and Colombia over the weekend. Trump threatened 25% tariffs on the country's goods but later suspended them after a deal was reached.
The dispute underscores concerns that Trump remains willing to impose tariffs to advance his policy agenda. The Federal Reserve will hold its first policy meeting of 2025 this week, with officials monitoring Trump's potential actions, which could present challenges to the central bank.