Tech stocks took a nosedive on Monday in response to the introduction of a new AI tool from China. The launch of DeepSeek is impacting major US tech players like Nvidia, Broadcom, and Microsoft. Investor anxiety is affecting a cluster of stocks that have been pivotal in driving a booming market.
China's DeepSeek AI Model Challenges US Tech Dominance
On Monday, technology stocks faced significant losses as investors grappled with the unveiling of a cutting-edge artificial intelligence model from China. Concerns arose that this new technology could pose a threat to the established leadership of key US tech giants.
DeepSeek's Impact on the Stock Market
Beyond the immediate market reactions, China's DeepSeek startup is disrupting the very core of the flourishing stock market. The sell-off has entangled giant companies like Nvidia and Microsoft, which wield substantial influence in US indices. Any vulnerabilities in these companies can render the overall market more precarious.
Challenges to Wall Street's Perception of AI Spending
The introduction of DeepSeek's innovative AI model, developed using cost-effective Nvidia chips, has called into question Wall Street's optimism regarding substantial AI investments. This optimistic outlook has been a driving force behind the soaring valuations of tech companies. Forecasts indicated that Amazon, Google, Meta, and Microsoft were set to collectively invest $300 billion in capital expenditures by 2025.
Market Turmoil Triggered by DeepSeek
DeepSeek's disruptive entrance into the market led to turmoil in equity futures over the weekend, with the trend intensifying on Monday as it surpassed ChatGPT on Apple's US App Store.
Stock Plunge and Major Players Affected
The Nasdaq 100 plummeted by up to 3.6%, with semiconductor stocks and prominent AI companies experiencing significant declines. The S&P 500 saw a 2.3% drop at intraday lows, while the Dow Jones Industrial Average shed as much as 398 points.
Impact on Top Tech Companies
Several major tech players experienced notable sell-offs on Monday morning, with the following showing intraday low percentage changes:
- Nvidia: -13%
- Broadcom: -14%
- Taiwan Semiconductor: -11%
- Microsoft: -5%
- Amazon: -4%
- Alphabet: -4%
Response of Companies Involved in AI Infrastructure Deal
Oracle and SoftBank, participants in a recent $500 billion AI infrastructure agreement announced by President Trump, also witnessed declines. Oracle shares dropped by up to 9%, while SoftBank shares fell by 8% following the closure of Tokyo's stock exchange on Monday.
Expert Observations on the Market Situation
Commenting on the unsettling tech sell-off, David Bahnsen, Chief Investment Officer of the Bahnsen Group, highlighted the risks posed by overvaluation in the AI and tech sector. Jeff Kilburg, CEO of KKM Financial, expressed concerns that DeepSeek could trigger a significant market correction.
Potential for US Tech Companies to Adapt
Despite the challenges posed by DeepSeek, some analysts see an opportunity for US tech firms to enhance their competitiveness. Nancy Tengler, Chief Investment Officer of Laffer Tengler Investments, noted that companies like Meta are already strategizing to counter DeepSeek's impact. Satya Nadella, CEO of Microsoft, suggested that the rise of more affordable AI models could drive broader technology adoption.
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By: jsor@businessinsider.com (Jennifer Sor)
Title: Tech Stocks Plunge Amid China’s DeepSeek AI Tool Debut
Sourced From: markets.businessinsider.com/news/stocks/deepseek-ai-tech-stocks-selloff-chatgpt-china-artificial-intelligence-chips-2025-1
Published Date: Mon, 27 Jan 2025 15:49:03 +0000
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