The ASX 200 was expected to open flat, with futures trading marginally positive to negative overnight.
The first salvo in an international AI arms race may just have been fired, as global financial markets reel following the release of Chinese startup DeepSeek’s low-cost artificial intelligence (AI) app.
This prompted a panic on global markets as investors reassessed the growth prospects of AI-related technologies.
Wall Street dragged by tech
The Nasdaq Composite slumped 3.1%, while the S&P 500 fell by 1.5%.
Nvidia, the world’s leading chipmaker, suffered its worst single-day drop since March 2020, losing 16.9% of its value and wiping nearly US$1 trillion off its market capitalisation – and DeepSeek was the reason.
DeepSeek’s AI Assistant, which leverages cheaper chips and minimal data, has overtaken ChatGPT as the top-rated free app on Apple’s US App Store.
This breakthrough has sparked investor concerns about reduced demand for high-cost, high-performance chips and infrastructure.
NAB senior FX strategist Rodrigo Catrill observed that if the platform is “as good as initial impressions suggest, demand for sophisticated chips, infrastructure and energy may not be as large as originally thought.”
The impact extended beyond semiconductors, with a gauge of semiconductor stocks falling 9.2%.
Energy-intensive companies tied to data centres were also hit hard, with power providers Vistra and GE Vernova plummeting 28.3% and 21.5%, respectively.
The Dow Jones still managed to rise 0.7%, supported by gains in consumer staples and healthcare stocks, which rose 2.8% and 2.2%, respectively.
In Europe, the FTSE 100 and the continent-wide FTSEurofirst 300 were flat, while European tech stocks dropped 3.3%, their largest decline since October.
Shares of chipmakers ASML and ASM International tumbled 7% and 12.2%, respectively.
Currencies and commodities
Commodity markets also saw sharp reactions. Brent crude fell 1.8% to US$77.08 a barrel, while West Texas Intermediate (WTI) crude dropped 2% to US$73.17 a barrel, driven by fears of reduced energy demand.
Gold prices fell 1.5% to US$2,738.40 per ounce as investors liquidated bullion amid a broader market sell-off.
Base metals were not spared, with copper down 2% and aluminium sliding 2.1%. Iron ore prices were stable at US$101.34 per tonne ahead of the Chinese Lunar New Year holiday.
Currency markets reflected mixed sentiment. The Euro strengthened against the US dollar, rising from US$1.0453 to US$1.0490 by the close.
The Australian dollar slipped below 63 US cents, trading at 62.90 US cents, while the Japanese yen firmed to JPY154.60 per US dollar.
Key domestic updates include the NAB business survey and CommSec’s State of the States economic report card, which may provide insights into local business conditions.
In the US, durable goods orders, home prices, consumer confidence and manufacturing data are due, alongside earnings results from Boeing, General Motors and Starbucks.
Market snapshot
- ASX 200 futures: flat at 8,368 points.
- Australian dollar: -0.4% at 61.92 US cents.
- Wall Street: Dow +0.5%, S&P 500 -1.9%, Nasdaq -3.6%.
- Europe: DAX -0.5%, FTSE flat, Eurostoxx -0.6%.
- Spot gold: -1.2% to $US2,738/ounce.
- Brent crude: -1.9% to US$77.00.
- Iron ore: +0.1% to $US104.50 a tonne.
- Bitcoin: -5.2% to $US99,676.
Source: ABC. Prices current around 7:15am AEDT