The Nasdaq Plunges as AI Concerns Spark Sell-Off
Summary:
The Nasdaq Composite (^IXIC) tumbled nearly 3% on Monday due to growing skepticism over the dominance of US artificial intelligence (AI). Chinese startup DeepSeek's recent product, which is reportedly more efficient and requires fewer chips than similar models from US companies, has raised questions about the US's leadership in AI.
Key Points:
* The S&P 500 (^GSPC) also declined by 1.7%, while the Dow Jones Industrial Average (^DJI) fell 0.2%.
* Chip-related stocks were hit hard, with Nvidia (NVDA) losing almost 11%, ASML (ASML) dropping nearly 8%, and Broadcom (AVGO) and Micron Technology (MU) also suffering losses.
* Microsoft (MSFT), Google parent Alphabet (GOOG, GOOGL), Meta (META), and Amazon (AMZN) stocks declined amid concerns about the impact of DeepSeek on AI revenue.
Market Reaction:
* Investors flocked to safe assets, causing the 10-year Treasury yield (^TNX) to fall as much as 12 basis points to 4.50%.
* Haven currencies, including the yen and Swiss franc, surged.
Implications:
* DeepSeek's claims have prompted a reassessment of bets on AI-driven growth.
* The Federal Reserve's first policy meeting of 2025 this week will be closely watched amid concerns about the potential impact of quick-fire moves by President Donald Trump.
* Trump's first week in office has seen a revival of trade war concerns after he threatened to impose tariffs on Colombia.
Additional Highlights:
* Wall Street analysts have expressed skepticism about the market's overreaction to DeepSeek.
* Experts caution that tariffs remain a key agenda item for the Trump administration.
* Market concentration has become a significant issue, with the Magnificent Seven companies contributing heavily to earnings growth in recent years.
Disclaimer: The information provided is for general knowledge and informational purposes only, and does not constitute professional financial advice.