Market Turmoil: AI Fears Send Stocks Plummeting
The tech-heavy Nasdaq Composite took a nosedive on Monday, plummeting nearly 3% as investors scrambled to reassess their bets on AI-driven growth. The S&P 500 followed suit, tumbling 1.7%, while the Dow Jones Industrial Average fell 0.2%. At the heart of the sell-off was China’s DeepSeek, a startup that claims its AI assistant uses cheaper chips and less data than leading models, yet performs equally well.
AI Bellwether Nvidia Takes a Hit
Nvidia’s shares plummeted almost 11% as chip-related names took a beating. ASML lost nearly 8%, while Broadcom and Micron Technology also suffered significant losses. Microsoft’s shares dropped more than 3% amid concerns about megacaps’ hefty investment in AI. Google parent Alphabet, Meta, and other tech giants also felt the pinch as investors fled to safer assets.
Safe-Haven Assets Surge
As stocks plummeted, investors flocked to safe-haven assets. The 10-year Treasury yield fell as much as 12 basis points to 4.50%, the lowest level in over a month. Haven currencies, including the yen and the Swiss franc, surged in value.
Trade War Concerns Revived
In the background, trade war concerns resurfaced as President Trump threatened to impose 25% tariffs on Colombian goods over the weekend. Although a deal was reached, the dispute highlighted concerns that Trump won’t hesitate to use tariffs to push through policy aims. The Federal Reserve, set to hold its first policy meeting of 2025 this week, will be watching closely for any quick-fire moves by Trump that could pose challenges to the central bank.
Big Tech Earnings Season Kicks Off
This week, Big Tech earnings season gets underway, with results from Apple, Tesla, Meta, and Microsoft taking center stage. Investors will be closely watching guidance for future profit as DeepSeek raises questions about revenue prospects.
Market Concentration Under Scrutiny
The recent market turmoil has brought attention to the concentration of the S&P 500, with the top 10 companies accounting for a record high percentage of the index’s value. While market concentration isn’t inherently bad, it does highlight the importance of earnings growth and the impact of unexpected threats to competitive standing.
Economic Data and Earnings Ahead
This week, investors will be keeping a close eye on economic data, including the Chicago Fed National Activity Index and new home sales. Earnings reports from AT&T, Nucor, SoFi, and Western Alliance Bancorporation will also be closely watched.
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