Global Markets Take a Hit as Chinese AI Startup Threatens US Dominance
The global equities market is experiencing a significant retreat, driven primarily by the emergence of Chinese artificial intelligence startup DeepSeek, which poses a threat to the dominance of US firms in the AI sector. This development has sent shockwaves through the market, with contracts on the Nasdaq 100 plummeting 3%, the largest decline in over a month.
European Stocks Take a Beating
The European stocks benchmark is also feeling the heat, led by a staggering 9% tumble in the shares of ASML Holding NV, a company that specializes in building cutting-edge chipmaking machines. This decline is likely to have a ripple effect on the entire tech industry, as investors reassess their positions in light of DeepSeek’s emergence.
US Tech Giants Under Pressure
The timing of DeepSeek’s latest AI model couldn’t be more critical, as four of the so-called Magnificent Seven tech stocks – Apple Inc., Microsoft Corp., Meta Platforms Inc., and Tesla Inc. – are set to post their results later this week. Investors will be watching closely to see how these companies respond to the challenge posed by DeepSeek, which is seen as a cost-effective alternative that can run on less-advanced chips.
Nvidia Corp. Under Threat
DeepSeek’s emergence is particularly concerning for US industry leaders like Nvidia Corp., which has built its business on high-performance AI chips. If DeepSeek can deliver similar performance at a lower cost, it could threaten Nvidia’s sky-high valuations and disrupt the entire AI landscape.
Market Strategists Weigh In
“While it remains to be seen if DeepSeek will prove to be a viable, cheaper alternative in the long term, initial worries are centered on whether US tech giants’ pricing power is being threatened,” said Jun Rong Yeap, a market strategist at IG Asia.
Bitcoin Takes a Hit
Meanwhile, Bitcoin has slid more than 6.5% to below $98,000, as traders booked profits following US President Donald Trump’s executive action on crypto policy. Although the order stopped short of confirming the establishment of a Bitcoin reserve, it has still had a significant impact on the cryptocurrency market.
Key Events This Week
This week promises to be a busy one, with a range of key events that could shape the direction of the markets. These include speeches by ECB President Christine Lagarde and BOE Governor Andrew Bailey, as well as earnings reports from Tesla, Microsoft, Meta, and ASML.
Market Moves
Here’s a snapshot of the main moves in markets:
- Stocks: The Stoxx Europe 600 fell 0.8%, while S&P 500 futures fell 1.9% and Nasdaq 100 futures fell 3.1%.
- Currencies: The Bloomberg Dollar Spot Index rose 0.2%, while the euro fell 0.2% to $1.0473 and the Japanese yen rose 0.4% to 155.36 per dollar.
- Cryptocurrencies: Bitcoin fell 5.3% to $99,010.51, while Ether fell 7.3% to $3,055.36.
- Bonds: The yield on 10-year Treasuries declined seven basis points to 4.55%, while Germany’s 10-year yield declined four basis points to 2.53%.
- Commodities: Brent crude fell 0.2% to $78.32 a barrel, while spot gold fell 0.5% to $2,757.25 an ounce.
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