Nasdaq Tumbles as Chinese AI Advance Sparks Sell-Off
The Nasdaq Composite Index (*^IXIC*) plummeted over 3% on Monday, led by concerns over the dominance of US artificial intelligence (AI) technology. A Chinese startup, DeepSeek, has released a new AI model that claims to use less expensive chips and data than popular American AI models.
Nvidia Leads Tech Rout
AI bellwether Nvidia (NVDA) saw its stock price plunge nearly 17%, wiping out a record $589 billion in market value. DeepSeek's claims have raised doubts about the demand for AI-related stocks and the future of AI investment in the US.
Broader Market Impact
The S&P 500 Index (*^GSPC*) also fell sharply, dropping by almost 1.5%. However, the blue-chip Dow Jones Industrial Average (*^DJI*) bucked the trend and rose by over 0.6%, supported by gains in defensive sectors and companies like Apple (AAPL) and Salesforce (CRM).
Treasury Yields Fall
As investors sought safety amid the tech sell-off, the 10-year Treasury yield (*^TNX*) declined by 12 basis points to a one-month low of 4.50%. Haven currencies like the yen and Swiss franc also surged.
Federal Reserve Meeting on Tap
The Federal Reserve (Fed) will hold its first policy meeting of the year later this week, with investors watching closely for any signs of quick-fire moves by President Trump that could challenge the central bank.
Investors Question AI Spending
DeepSeek's claims have raised concerns among investors about the exorbitant spending by American tech giants on AI. The cost-efficient nature of the Chinese AI model has thrown into question the valuation of US tech companies and the future of AI supremacy.
Trump's Tariff Threats Resurface
Trade war concerns have been revived after President Trump threatened to impose 25% tariffs on goods from Colombia over a dispute regarding deported migrants. The situation has raised fears about a potential escalation of trade tensions.