Market Pulse: Tech Earnings Take Center Stage
As the dust settles on the AI-related stock shakeout, investors are shifting their focus to megacap tech earnings, with the Federal Reserve poised to pause its easing campaign. The recent hoopla surrounding China’s DeepSeek AI model has sparked concerns about the concentration of broad index fortunes in a handful of tech giants and the long-term value of massive AI investments.
Nvidia’s Recovery
Nvidia, a darling of the AI sector, has clawed back some of its steep losses, with shares set to recover over half of the 17% plunge that wiped out more than half a trillion dollars from its market value. This rebound has reintroduced broader market fears about the dominance of tech stocks and the wisdom of pouring hundreds of billions of dollars into AI development.
Megacap Earnings in the Spotlight
Quarterly updates from Microsoft, Meta, and Tesla on Wednesday may provide insight into the AI investment conundrum. With China’s markets closed for the lunar new year holiday, investors are eagerly awaiting more information about DeepSeek, which has sparked national security concerns and allegations of intellectual property theft.
Global Reaction
Norway’s $1.8 trillion wealth fund, among others, has expressed surprise and concern about the DeepSeek development, citing tech concentration risk in portfolios. Meanwhile, Chinese tech giant Alibaba has released a new version of its Qwen 2.5 AI model, claiming it surpasses DeepSeek-V3.
Global Markets
U.S. stock futures are marginally higher, while European stocks have surged to new records, driven by strong earnings from chip equipment maker ASML. The European technology sector has seen its best single-day gain in a year, up 4.5%. Central banks in Canada and Sweden have cut interest rates, with the European Central Bank expected to follow suit on Thursday.
Fed Decision Looms
The Federal Reserve is set to stand pat on interest rates, marking the first meeting without a rate cut since September. With inflation above 2% and GDP growth estimates back above 3%, the Fed is expected to hold the line while assessing the macro impact of new policies. Encouraging signs from the equity market and consumer confidence data have led Fed futures to fully price in two more rate cuts by the end of the year.
Key Developments Ahead
Investors will be watching closely for the Federal Reserve’s policy decision, press conference, and earnings reports from Microsoft, Meta, Tesla, and other major corporations. The Bank of Canada’s policy decision and briefing by governor Tiff Macklem will also provide direction for U.S. markets.
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