4:20pm: AI competition fears weigh on tech stocks
Stocks closed mixed on Monday, with the Dow Jones Industrial Average managing to eke out gains while the S&P 500 and Nasdaq Composite suffered significant losses
The Dow Jones rose 0.7% or 289 points to close at 44,714. The blue-chip index's resilience was supported by gains in defensive stocks and some tech giants like Apple.
In contrast, the S&P 500 fell 1.5% or 89 points, ending the session at 6,012. The broader market index was dragged down by the poor performance of semiconductor stocks and other technology-related companies.
The Nasdaq bore the brunt of the tech sell-off, plummeting 3.1% or 612 points to close at 19,342. The tech-heavy index was particularly affected by concerns about U.S. leadership in AI technology following news of advancements by Chinese competitors.
3:43pm: Winners and losers since Trump's inauguration
While DeepSeek’s launch may shake investor confidence in US AI dominance, it’s important to consider the broader market context and performance trends, says Frank Holmes, CEO of U.S. Global Investors.
"Tech stocks are selling off sharply today, triggered by concerns that China’s just-released DeepSeek AI assistant may steal the thunder from U.S.-based platforms like OpenAI’s ChatGPT," Holmes said.
"Before this week, however, markets have been responding with gusto since November’s presidential election, especially in a few key—and perhaps expected—industries.
"The biggest winner so far was the automobile industry, led by Tesla, up an impressive 70% since Election Day as of Friday.
"Despite President Donald Trump’s rollback of Biden-era electric vehicle (EV) mandates, Tesla has continued to command investor confidence, possibly due to Elon Musk’s close ties to the president."
3:05pm: $1T wriped off markets
"DeepSeek AI threat wipes up to $1 trillion of US stock markets", says Axel Rudolph, Senior Technical Analyst at online trading platform IG.
"The Nasdaq 100's near 4% and S&P 500 over 2% pre-market drop, following China's DeepSeek R1 AI, which surpassed ChatGPT as the top free app on the US App Store and apparently cost less than $6 million to develop, made investors question lofty US tech valuations."
As well, VIX is coming off its 20 spike high, Rudolph noted.
"The US VIX volatility index briefly spiked to over 20, as it did in mid-January, before falling back as US indices stabilised amid rapidly falling US 10-year yields which dropped by 12 basis points to 4.50% before recovering. The WTI crude oil price dropped by a percentage point, as did the price of gold."
12:55pm: DeepSeek's AI claims spark tech slump
The Nasdaq continued to be pummeled by the selloff in AI-related stocks on Monday, with the tech-heavy index plummeting 3.5%, marking its worst performance since early August.
Elsewhere at midday Monday, the S&P 500 dropped 1.9%, while the Dow Jones showed modest resilience with a slight gain of 0.2%.
Several factors are driving the market’s downturn, including fears surrounding AI. Major tech stocks continued taking substantial hits, including Nvidia, which saw its shares drop almost 11%, and Microsoft, which fell over 3%. Other tech giants like Alphabet, Meta, and Amazon also experienced declines.
11:48am: Week ahead
A packed economic calendar is on deck this week, with key inflation metrics, earnings, retail sales data, and Fed commentary ahead.
The Magnificent 7 will be in focus as more than half, including Microsoft Corp (NASDAQ:MSFT), Meta Platforms Inc (NASDAQ:META, ETR:FB2A, SWX:FB), Tesla Inc (NASDAQ:TSLA), and Apple Inc (NASDAQ:AAPL, ETR:APC), report earnings amid heightened market scrutiny.
Apple, the weakest performer in the group this year with a 12% decline, is under pressure due to slowing iPhone demand in China, though growth in services could offset some risks. Meta, the year's top performer with a 10% gain, is investing heavily in AI with a 60% capex boost, but questions linger about its ability to monetize these investments, making it vulnerable to an earnings miss, according to Kathleen Brooks, research director at XTB.
10.28am: $1 trillion wiped from European, US tech stocks
Some US$1 trillion (£799 billion) was wiped off European and US artificial intelligence-focused companies’ market capitalisations on Monday.
Nvidia Corp, having dropped as much as 13% at the open, shed US$465 billion off its valuation alone to suffer the largest rout in stock market history, according to Bloomberg.
Its decline meant Apple Inc retook the spot as the world’s largest company by market cap, while Microsoft Corp creeped up to second place.
Microsoft itself faced a beating though, dropping 3.5% early on to lose some US$119 billion off its valuation.
Micron Technology Inc, ASML Holding NV, Advanced Micro Devices Inc, Dell Technologies Inc and Super Micro Computer Inc were also among the string of names to drop.
The sell off had been sparked by last week’s unveiling of an artificial intelligence bot by China’s DeepSeek, said to be far cheaper and efficient than existing models.
“It's potentially a major challenge to the incumbents, and questions are being raised about the billions of dollars they've pumped into developing their own AI models,” ING Economics analysts noted.
“The breakthrough could be that DeepSeek can achieve a state-of-the-art model without state-of-the-art equipment. The current notion is that for larger models, one needs more computing power - if you want more context, you need more calculations.”
9.44am: Nasdaq battered as Nvidia sheds 10% on DeepSeek AI scare
Wall Street faced a blow as trading got underway for the week on Monday amidst a global technology sector sell-off that sent Nvidia Corp shares tumbling.
After DeepSeek unveiled a cheaper and more efficient artificial intelligence programme last week, Nvidia opened Monday’s trading 10.8% lower at US$127.57.
Microsoft Corp and Amazon.com Inc were also among technology giants to come under pressure as fears built around the US’ dominance in the space.
The Nasdaq slid 3.1% following the bell as a result, while the S&P 500 dropped 1.8% and the Dow Jones moved 0.2% lower.
“If China is catching up quickly to the US in the AI race, then the economics of AI will be turned on its head,” XTB analyst Kathleen Brooks said.
“It could also have a geopolitical impact since China could be the first superpower to gain super intelligence.”
Wider risk-off sentiment buoyed demand for bonds in the meantime, with the yield on 10-year US debt dropping nine basis points to 4.54% early on.
6.41am: Stocks set to slump
Wall Street looked set to take a beating ahead of Monday’s trading as a global technology sector sell-off sparked by China’s DeepSeek threatened to weigh.
Futures had the Nasdaq off 4.2% ahead of the opening bell, while the Dow Jones and S&P 500 were seen 0.9% and 2.4% lower respectively.
Last week saw DeepSeek unveil a free AI assistant using chips said to be far cheaper and less data-hungry than existing technology.
Nvidia Corp was among a host of stocks globally set for a pummelling as a result, with shares tumbling 11.1% in pre-market trading.
“The prospect of a high-performance, low-cost product provides significant question marks over the necessity of spending hundreds of billions on Nvidia chips and development going forward,” Scope Markets analyst Joshua Mahony commented.
“This is a timely reminder that the AI era will likely be unpredictable, just like the development of the internet [and] that the huge investment undertaken by big tech over recent years may not have built them the kind of impenetrable moat against Chinese competition many had presumed.”
Kenneth Lamont, principal at Morningstar, said: “With many investors heavily exposed to AI’s biggest players, disruption in the sector could ripple through portfolios.
“While DeepSeek itself isn’t publicly investable, one way to guard against such risks may be diversifying away from the so-called 'Magnificent Seven' tech giants—perhaps by reallocating to equal-weighted strategies.
“This serves as a fresh reminder for thematic investors: mega-trends rarely unfold as expected, and today’s dominant players might not be tomorrow’s winners."