U S. stock markets tumble as investors worry about DeepSeek : NPR

U S. stock markets tumble as investors worry about DeepSeek : NPR

The S&P 500 dropped 1.5%, dragged down in large part by a 16.9% fall for Nvidia. Other Big Tech stocks also took heavy losses, and they pulled the Nasdaq composite down 3.1% for its worst loss in more than a month. AI bellwether Nvidia’s shares plunged nearly 17% as chip-related names took a bruising. ASML (ASML) lost over 6%, while Broadcom (AVGO) and Micron Technology (MU) also got hammered.

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Bespoke Investment Group’s Paul Hickey noted that Apple’s reluctance to invest heavily in AI, once seen as a drawback, was now viewed positively in light of the market’s recent shift. DeepSeek, which unveiled its latest AI model on January 20, has been seen as a direct competitor to OpenAI, with some industry experts already praising its capabilities. American venture capitalist Marc Andreessen called the new AI model “one of the most amazing and impressive breakthroughs I’ve ever seen.” The market is still technically oversold but just barely, according to our trusted momentum indicator, the S&P Short Range Oscillator. The threshold for being oversold, which is our cue to look for opportunities to put money to work, is minus 4%. Before Monday’s drop, which was its worst since the 2020 COVID crash, Nvidia’s stock had soared from less than $20 to more than $140 in less than two years, for example.

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• DeepSeek’s training costs amounted to just $5.6 million, compared to the more than $100 million spent on OpenAI’s GPT, raising concerns about the financial viability of AI investments moving forward.
• This morning’s earnings reports for the most part were fine but were met with a mixed response.
• With Tesla set to release its latest quarterly earnings report, Wall Street thinks the stock can keep rising on a “golden age” for automation and AI.

Investors seek defensive stocks amid tech rout, Dow flips into green

There were also more tariff headlines with the FT reporting that newly confirmed Treasury Secretary Bessent is pushing for universal tariffs starting at 2.5% and increasing by that amount monthly which could reach 20%. When asked President Trump said he supports an across-the-board tariff of “much bigger” than that level. This morning’s earnings reports for the most part were fine but were met with a mixed response. Futures bounced modestly overnight led by the stocks that dowmarkets were most beaten up yesterday however, those gains faded by the open. “These companies have deep pockets and talent,” Nancy Tengler, the chief investment officer of Laffer Tengler Investments, said in a note, pointing to reports that Meta had already set up war rooms to analyze DeepSeek. “We will soon find out if all the claims are true and it is my expectation that we will also learn how quickly US firms can adapt.”

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One effect of this has been to cause a rise in yields on US Treasury long-term bonds, reflecting fears of further inflation. The US has been experiencing a long “bull” stock market, that is rapid growth in stock prices, although this week tech stocks tumbled over the future prospects for US-built AI. The shock to financial markets came from China, where a company called DeepSeek unveiled a large language model that can compete with U.S. giants but at potentially a fraction of the cost. Nvidia lost nearly $600 billion in market value Monday as tech stocks plunged amid fears that Chinese artificial intelligence firm DeepSeek leapfrogged U.S. dominance in AI development. In stock markets abroad, movements for broad indexes across Europe and Asia weren’t as forceful as for the big U.S. tech stocks. Stocks edged 0.1% lower in Shanghai after a survey of manufacturers showed export orders in China dropping to a five-month low.

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Chinese startup DeepSeek has sparked a shake-up in the AI industry with the launch of its latest models, which it claims rival or exceed the performance of leading U.S. models at a fraction of the cost. DeepSeek’s AI Assistant, powered by its DeepSeek-V3 model, has already overtaken ChatGPT as the top-rated free app on the U.S. The selloff in AI-linked stocks comes after the rise of DeepSeek, a Chinese AI startup that has drawn attention for offering a competitive, lower-cost alternative to Microsoft-backed OpenAI’s ChatGPT.

At the end of 2024, Microsoft said it planned $35 billion in investments to build “trusted and secure AI and cloud datacenter infrastructure.” He would have been impeached by Congress had he not resigned in August 1974 following the revelations of the Watergate scandal. Their immense sizes give them huge sway over the S&P 500 and other indexes that give more weight to bigger companies.

• Bespoke Investment Group’s Paul Hickey noted that Apple’s reluctance to invest heavily in AI, once seen as a drawback, was now viewed positively in light of the market’s recent shift.
• This cost him the 1932 presidential election when Democrat Franklin D. Roosevelt was elected for the first time.
• “DeepSeek is a word you’ve heard all weekend, and you’ll hear all day today,” Jeff Kilburg, the CEO of KKM Financial, told CNBC on Monday.
• When bonds are paying more in interest, they put downward pressure on stock prices.
• DeepSeek, which unveiled its latest AI model on January 20, has been seen as a direct competitor to OpenAI, with some industry experts already praising its capabilities.

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Newsweek contacted the White House via email on Monday for comment. Investors are becoming increasingly cautious, wary that the rapid advancements in AI could destabilize the market and hinder further growth. Nvidia said in a statement that “DeepSeek is an excellent AI advancement” and an example of what is possible, “leveraging widely available models and compute that is fully export control compliant.” The trajectory of the dollar index, which has climbed more than 6% this year, is something to watch after the Federal Reserve projected fewer rate cuts in 2025. In the background, trade war concerns revived during a face-off between President Donald Trump and Colombia over the weekend. Trump threatened to impose 25% tariffs on the country’s goods in a row over deported migrants before putting the duties on pause after a deal was reached.