Nasdaq Takes a Hit as AI Fears Hammer Tech Stocks
The Nasdaq Composite (^IXIC) plunged over 3% on Monday, dragged down by concerns about U.S. dominance in artificial intelligence (AI). The S&P 500 (^GSPC) followed suit, shedding nearly 1.5%, while the Dow Jones Industrial Average (^DJI) bucked the trend with a gain of 0.6% as investors sought haven in defensive sectors.
DeepSeek Challenges U.S. AI Leadership
The Nasdaq's sell-off stemmed from concerns raised by DeepSeek, a Chinese AI startup. DeepSeek claims that its AI assistant operates on cheaper chips and with less data than leading U.S. models, but delivers comparable results. This revelation has cast doubt on the astronomical growth estimates for AI demand and prompted investors to question bets on AI-driven stocks.
Nvidia Leads Tech Rout
AI bellwether Nvidia (NVDA) led the tech sell-off, plummeting nearly 17%. Other chip-related stocks, including ASML (ASML), Broadcom (AVGO), and Micron Technology (MU), also took a beating. Microsoft (MSFT) shares fell over 2% amid worries about megacap investments in AI. Google parent Alphabet (GOOG, GOOGL) and Amazon (AMZN) also faced losses.
Defensive Stocks Provide Shelter
As tech stocks tumbled, investors turned to defensive assets perceived as safe havens. The 10-year Treasury yield (^TNX) fell 12 basis points to its lowest level in over a month. Havens such as the yen and Swiss franc also strengthened.
Trade War Concerns Resurface
Amid the AI-fueled sell-off, trade war concerns were reignited following a standoff between President Donald Trump and Colombia over the weekend. Trump threatened to impose 25% tariffs on Colombian goods before pausing the move after a deal was struck.
Fed Meeting on the Horizon
The Federal Reserve will hold its first policy meeting of 2025 this week, with officials keeping a close eye on Trump's potential policy moves that could challenge the central bank. The president has called for lower interest rates, setting the stage for a clash with policymakers gathering for a two-day meeting on Tuesday.
Additional Key Points:
* Apple (AAPL), Meta (META), and Salesforce (CRM) bucked the tech rout.
* The AI-exposed power stocks Constellation Energy (CEG), Vistra Corp (VST), and Oklo (OKLO) were among the hardest hit.
* Big Tech earnings season kicks off this week, with results from Apple, Tesla (TSLA), Meta, and Microsoft in focus.
* Experts emphasize the need to scrutinize DeepSeek's claims and question the overreaction in the market.