Market Turmoil: AI Startup Sparks Selloff in Tech Giants
A sudden shift in the artificial intelligence landscape has sent shockwaves through the tech sector, causing a massive selloff in shares of industry giants. The catalyst behind this market turmoil is a free AI assistant launched by Chinese startup DeepSeek, which claims to use lower-cost chips and less data than its competitors.
Challenging the Status Quo
DeepSeek’s AI model has seemingly challenged the widespread assumption that AI will drive demand for chipmakers, data centers, and other related industries. This has led to a reassessment of the potential damage it could have on the burgeoning AI industry, which has been a key driver of growth in the main indices over the past couple of years.
Tech Stocks Take a Hit
The impact was felt across the board, with megacap stocks including Nvidia, AMD, and Micron Technology plummeting in premarket trading. Nvidia, often seen as the poster child of AI, dropped a staggering 6.9%. Microsoft and Meta Platforms fell 3.3% each, while Google-parent Alphabet lost 3.2%. Apple, set to report earnings later this week, slid 1.4%.
AI Server Makers Feel the Pain
The ripple effect extended to AI server makers, with Dell Technologies and Super Micro Computer sliding about 8% each. The Dow E-minis were down 472 points, or 1.06%, while the S&P 500 E-minis fell 120.25 points, or 1.96%. The Nasdaq 100 E-minis took the biggest hit, dropping 667 points, or 3.04%.
Global Market Caution
Adding to the caution in global markets was the recent trade war scare between the U.S. and Colombia, which was narrowly averted on Sunday. The U.S. Federal Reserve’s interest rate decision, due on Wednesday, is also expected to be a key market mover. The December reading of the personal consumption expenditures (PCE) on Friday will provide crucial insights into the inflation trajectory.
Earnings Season Heats Up
This week will see a slew of earnings reports from industry leaders, including Microsoft, Meta Platforms, Apple, Tesla, Exxon Mobil, United Parcel Service, and Boeing. As markets remain on edge, investors will be closely watching these reports for signs of growth and stability.
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