Nasdaq Plunges on AI Concerns, Nvidia Loses Record Market Value
Key Points:
* The Nasdaq Composite Index (^IXIC) plummeted over 3% on Monday due to fears over artificial intelligence (AI) supremacy.
* Nvidia (NVDA), a leading chipmaker, tanked nearly 17% as investors questioned the future of AI investment.
* The Nasdaq's decline was sparked by DeepSeek, a Chinese AI startup whose model reported using cheaper chips and less data than American counterparts.
Details:
The tech-heavy Nasdaq Composite (^IXIC) witnessed a significant decline, losing more than 3%. The broader S&P 500 (^GSPC) also dropped by almost 1.5%. However, the blue-chip Dow Jones Industrial Average (^DJI), which is less reliant on technology stocks, gained over 0.6% as investors sought safer havens.
DeepSeek's AI assistant, which launched on January 20th, has raised concerns among investors about the cost-efficiency of AI spending. DeepSeek's model reportedly cost just $5.6 million to train, while OpenAI's GPT model exceeded $100 million.
Nvidia's stock price suffered heavily due to investors' uncertainty surrounding the future of AI hardware demand. Asml (ASML), Broadcom (AVGO), and Micron Technology (MU) also experienced significant losses in the chipmaking sector.
The tech rout extended to other industry giants such as Apple (AAPL), Meta (META), and software titan Salesforce (CRM). However, these companies bucked the trend and gained value.
Market Reaction:
Investors flocked to defensive sectors as tech stocks plunged. The 10-year Treasury yield (^TNX) fell to its lowest level in over a month, reaching 4.50%. Safe-haven currencies like the yen and Swiss franc also surged in value.
The Federal Reserve's first policy meeting of 2025, scheduled for this week, will be closely watched amidst concerns about President Donald Trump's influence on economic stability. Trump has called for lower interest rates, potentially creating a clash with policymakers.