Tech ETFs Plummet as China’s DeepSeek AI Threatens Market Dominance
The tech sector took a significant hit on Monday, with exchange-traded funds (ETFs) focused on the industry experiencing a sharp decline. The primary concern driving this downturn is the emergence of China’s DeepSeek AI, which has the potential to disrupt the market share of tech giants like Nvidia Corp. and Tesla Inc.
DeepSeek’s Competitive Advantage
DeepSeek’s AI models, reportedly developed at a fraction of the cost of those created by US tech firms, have sparked fears that the company will siphon spending away from the domestic semiconductor industry. The Invesco QQQ Trust, a $333 billion ETF with significant holdings in Nvidia, Apple Inc., and Microsoft Corp., fell 2.7% on the news.
Nvidia Shares Take a Hit
Nvidia shares plummeted 12%, dragging down ETFs where it holds top positions. The company’s significant presence in the Strive U.S. Semiconductor ETF and iShares Global Tech ETF led to declines of 1.6% and 4.6%, respectively.
Broad Impact Across Tech ETFs
The ripple effect of DeepSeek’s emergence was felt across a range of tech ETFs, with the Kurv Technology Titans Select ETF falling 3.1%. This widespread decline reflects investors’ concerns about the potential disruption to the artificial intelligence landscape.
China-Focused Funds Buck the Trend
Meanwhile, China-focused funds experienced a surge in value, alongside volatility and consumer-focused sectors. The iShares China Large-Cap ETF rose 0.6%, and the KraneShares CSI China Internet ETF added 0.2%.
Sector Rotation
As tech ETFs struggled, other sectors saw gains. The ProShares VIX Short-Term Futures ETF jumped 8.6%, while the Consumer Staples Select Sector SPDR Fund and Health Care Select Sector SPDR Fund rose 1.3% and nearly 1%, respectively.
Nvidia’s Decline Sparks Short-Selling
The GraniteShares 2x Short NVDA Daily ETF soared more than 27% as Nvidia posted its largest single-day decline of 2025. This sharp decline also impacted ETFs with significant holdings in Meta and Microsoft, which fell 3.1% and 3.8%, respectively.
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