Tech Stocks Lead Market Decline as Fed Holds Rates

Market Wrap-Up

Tech stocks dragged markets lower on Wednesday as investors remained cautious following the Federal Reserve's decision to maintain interest rates unchanged. The Nasdaq Composite (^IXIC) lost over 0.5%, reversing some of the recovery seen the previous day. The S&P 500 (^GSPC) and Dow Jones Industrial Average (^DJI) both declined, by 0.4% and 0.2% respectively.

Federal Reserve Policy

The Fed's policy statement showed a slight shift in language on inflation. The previous statement had indicated progress towards the 2% inflation target, while the updated statement simply stated that inflation "remains somewhat elevated." This change raised concerns among investors about the Fed's confidence in the trajectory of inflation.

Fed Chair Jerome Powell attempted to clarify the language shift as "cleanup," but markets initially reacted negatively. However, stocks later recovered as Powell downplayed the significance of the change.

Nividia Woes Continue

Nvidia (NVDA) faced further pressure, as Bloomberg reported that the Trump administration was considering additional curbs on its chip exports to China. This news came after a report that Chinese startup DeepSeek had developed a cost-effective artificial intelligence model, raising questions about the potential impact on AI investment.

AI Outlook

The DeepSeek model has sparked a debate about the future of AI spending and costs. Alibaba (BABA) released a new AI model that it claims is superior to DeepSeek's, while OpenAI accused DeepSeek of using its proprietary models for training.

Investors are eagerly awaiting fourth-quarter earnings from Big Tech companies such as Meta (META) and Microsoft (MSFT) to assess the impact of AI spending and the overall health of the sector.

Other Notable News

* ASML (ASML), a key toolmaker in the AI chip chain, saw a boost in its stock price after strong earnings and reassurance from its CEO that DeepSeek's advancements would not hurt demand for AI chips.
* Tesla (TSLA) will report earnings later on Wednesday, with investors looking for a new catalyst to reignite the stock's recent rally.
* Former President Donald Trump is reportedly considering turning TikTok's fate into a public bidding war, adding uncertainty to the future of the social media app.