Stock Market Falls as AI Concerns Hit Tech Giants

Chinese AI Breakthrough Shakes Confidence in US Tech Giants

China’s DeepSeek has disrupted global AI markets by claiming that its AI system performs as effectively as top-tier models while using fewer resources. This revelation sent shockwaves through US markets, with Nvidia (NVDA) leading the plunge, falling about 11%. Other notable declines included Micron Technology (MU), Broadcom (AVGO), and ASML (ASML), all losing around 8%.

The Nasdaq Composite (^IXIC), heavily weighted towards tech stocks, dropped nearly 3%, while the broader S&P 500 (^GSPC) slipped by 1.7%. DeepSeek’s ascent has prompted investors to reconsider whether AI-driven growth will sustain the value of Big Tech stocks.

Major Losses in AI-Driven Companies

The sell-off in tech extended beyond semiconductors to megacap tech giants. Microsoft (MSFT) fell over 3%, as concerns about large-scale AI investments spooked investors. Alphabet (GOOG, GOOGL), Amazon (AMZN), and Meta (META) also saw declines.

This sell-off coincides with the start of the tech earnings season. Key companies, including Microsoft, Tesla, Apple (AAPL), and Meta, are set to report earnings this week. Guidance for future profits will be a critical factor, especially as fears grow over reduced AI-driven revenue potential.

Flight to Safe Haven Assets

Amid the tech stock turmoil, investors turned to safer bets. The 10-year Treasury yield (^TNX) fell as much as 12 basis points, reaching 4.50%, its lowest level in over a month. Demand surged for haven currencies like the Swiss franc and the yen, providing some stability to markets.

Trump Tariff Threat Revives Trade War Concerns

Over the weekend, a confrontation between President Donald Trump and Colombia reignited fears of a potential trade war. Trump had threatened to impose 25% tariffs on Colombian goods due to a migrant deportation issue. Although the dispute was resolved, the episode raised concerns about Trump’s willingness to use tariffs to achieve policy goals, increasing uncertainty among investors.

Focus on Federal Reserve Meeting

This week also marks the Federal Reserve’s first policy meeting of 2025. Investors are closely watching for any signs of conflict between Trump and the Fed. Trump’s recent calls for rate cuts could clash with central bank policymakers as they convene their two-day meeting starting Tuesday

Key Take aways

China’s DeepSeek has disrupted confidence in AI-led growth for US tech companies.
Nasdaq plunged nearly 3% as tech giants like Nvidia and Microsoft suffered major losses.
Investors shifted to safe-haven assets, with bond yields and currencies offering some relief.
Trade war fears and Federal Reserve policies remain critical for market stability.