Nasdaq Tumbles on AI Concerns

On Monday, the tech-heavy Nasdaq Composite (^IXIC) plummeted by over 3% amid growing fears about the dominance of US artificial intelligence (AI). The S&P 500 (^GSPC) also declined sharply, falling by nearly 1.5%. In contrast, the Dow Jones Industrial Average (^DJI), which is less dependent on tech stocks, managed to rise by more than 0.6%.

The sell-off was triggered by concerns raised by DeepSeek, a Chinese startup that has developed an AI model that performs equally well as leading models but uses cheaper chips and less data. DeepSeek's claims have cast doubt on the assumption that continued AI demand will fuel gains for tech stocks.

Nvidia (NVDA), a bellwether for AI stocks, suffered heavily, with its shares plunging by nearly 17%. Other chip-related companies, including ASML (ASML), Broadcom (AVGO), and Micron Technology (MU), also experienced losses. Concerns about AI investments also weighed on the stocks of Microsoft (MSFT), Google parent Alphabet (GOOG, GOOGL), and Amazon (AMZN).

Rising Treasury Yields Provide Safe Haven

As stock markets tumbled, investors sought refuge in perceived safe assets. The 10-year Treasury yield (^TNX) fell to its lowest level in over a month, reaching 4.50%. Haven currencies such as the yen and Swiss franc also gained traction.

Trade War Concerns Resurface

In the background, trade war concerns revived after a face-off between President Donald Trump and Colombia. Trump threatened to impose tariffs on Colombian goods over deported migrants, but the duties were later put on hold after a deal was reached.

Fed Policy Meeting on the Horizon

Later this week, the Federal Reserve will hold its first policy meeting of 2025. Officials are expected to closely monitor Trump's actions, which could pose challenges for the central bank. Trump has advocated for lower interest rates, potentially signaling a clash with policymakers.

Big Tech Earnings and Fed Meeting in Focus

This week will be marked by the commencement of Big Tech earnings season, with major companies like Apple, Tesla (TSLA), Meta, and Microsoft releasing their financial results. Eyes will be on their guidance for future profits amidst concerns raised by DeepSeek.

Additionally, the Federal Reserve's policy meeting will be a key event to watch, with analysts expecting the Fed to remain cautious given the uncertainties surrounding Trump's policies.