Nasdaq Futures Tumble as Chinese AI Startup Raises Market Concerns

Synopsis:

Nasdaq futures plummeted on Monday, leading a sell-off in US stocks amid concerns sparked by DeepSeek, a Chinese AI startup. The startup's claims of developing a powerful AI model using less advanced chips and data than US rivals have cast doubt on the profitability and leadership of American AI companies.

Key Points:

* Nasdaq 100 (NQ=F) contracts sank nearly 4%, while S&P 500 futures (ES=F) dropped over 2%.
* Dow Jones Industrial Average futures (YM=F) fell 0.9%, or about 380 points.
* AI bellwether Nvidia (NVDA) shares tumbled over 11% in pre-market trading, dragging down other chip-related stocks.
* Megacap stocks like Meta (META) and Microsoft (MSFT) also lost ground due to concerns about their AI investments.
* Investors flocked to safe-haven assets, such as US Treasuries and currencies like the yen and Swiss franc.

Big Tech Earnings Season and Policy Implications:

* Big Tech earnings season begins this week, with results from Apple (AAPL), Tesla, Meta, and Microsoft.
* DeepSeek's claims raise questions about future profit guidance and revenue prospects for AI-focused companies.
* The Federal Reserve's first policy meeting of 2025 this week is being closely watched due to concerns about President Trump's potential influence and calls for interest rate cuts.
* Trump's first week in office has highlighted the ongoing threat of tariffs, as exemplified by his dispute with Colombia.

Market Concentration and DeepSeek's Impact:

* The S&P 500 has become increasingly concentrated, with the largest 10 companies accounting for a record high percentage of its value.
* DeepSeek's claims have led to concerns about the competitive standing of large AI companies and the impact on their earnings growth.
* Investors are reevaluating their expectations for earnings and the value of future cash flows, leading to a decline in the overall stock market value.