The Nasdaq Sinks on AI Fears as Chinese Startup Raises Questions
Key Points:
* The Nasdaq Composite (^IXIC) plunged nearly 3.5%, while the S&P 500 (^GSPC) dropped roughly 2% due to fears sparked by China's DeepSeek AI startup.
* DeepSeek's AI assistant, which claims to use less advanced chips and data than leading models, has raised concerns about the profitability of AI investments.
* Chip-related stocks, including Nvidia (NVDA), ASML (ASML), and Micron Technology (MU), suffered significant losses.
* Defensive stocks, such as Johnson & Johnson (JNJ) and Procter & Gamble (PG), gained ground as investors sought safer investments.
* Interest rates for 10-year Treasuries (^TNX) fell as investors shifted towards assets perceived as less risky.
Market Reaction:
* Microsoft (MSFT), Google parent Alphabet (GOOG, GOOGL), and Amazon (AMZN) all declined as tech stocks faltered.
* Oil prices dropped 2% on Monday due to tariff tensions and weaker-than-expected Chinese manufacturing data.
* Bitcoin (BTC=F) fell below $100,000 as cryptocurrencies experienced a selloff alongside tech stocks.
* Defensive sectors, such as consumer staples, utilities, and healthcare, outperformed the broader market.
Analyst Commentary:
* Analysts are questioning the market's extreme reaction to DeepSeek's AI model, emphasizing that similar technologies have not yet impacted AI investment.
* Economic sanctions and trade war concerns have contributed to market volatility, particularly regarding trade with Colombia.
* The Federal Reserve will hold its first policy meeting of 2025 this week, with investors anticipating a conservative approach in light of Trump's potential interest rate cuts.