Nasdaq Futures Tumble as DeepSeek Rattles Tech: Markets Wrap
Margaryta Kirakosian and Allegra Catelli
5 min read
(Bloomberg) -- Stocks slumped, with Nasdaq futures briefly losing more than 5%, on concern that a cheaper artificial intelligence model from China threatens the dominance of US technology.
Nvidia Corp. plunged 11% in US premarket trading, setting it up for the biggest drop on record in terms of market capitalization if the move holds. The volume of Nasdaq 100 futures contracts changing hands was about four times the 30-day average, according to data compiled by Bloomberg. S&P 500 futures were down 2.1% and Bitcoin slid below $100,000.
Subscribe to the Bloomberg Daybreak podcast on Apple, Spotify or anywhere you listen.
The buzz over DeepSeek emerged over the weekend, with tech analysts saying the company’s AI model provides comparable performance to the world’s best chatbots at a fraction of the price. For investors, it put a question mark over an AI-driven rally that’s added $15 trillion to the Nasdaq 100 since 2022 and been at the heart of US equity gains.
“It does put a lot of scrutiny at the level of valuations,” said Benedicte Lowe, equity derivatives strategist at BNP Paribas Markets 360. “We are quite positive on US tech stock sector. But it puts pressure on the outlook and is a turning point for the companies at this stage in the cycle.”
DeepSeek Rattles Silicon Valley With Lower-Cost AI Model: Q&A
The potential challenge DeepSeek presents to Silicon Valley’s business model of massive spending on research and development sent ripples into other industries.
Power stocks, which are typically less volatile, slid on fears of weaker electricity demand from AI data centers. Constellation Energy Corp. fell 13% and NRG lost 10% in early trading. Makers of power equipment were also dropping, with Oklo, a developer of small nuclear reactors backed by OpenAI’s Sam Altman, down 14%.
In Europe, chip-equipment maker ASML Holding NV sank 8%, the biggest selloff since October. That weighed on the Europe’s Stoxx 600, which was trading 0.5% lower.
Colombia Spat
President Donald Trump’s spat over the weekend with Colombia added to the bearish mood in the market.
Trump had announced sweeping tariffs on the country and then abruptly changed course after reaching a deal on the return of deported migrants. The yield on 10-year US bonds was down 12 basis points at 4.50% as investors sought haven assets.
“The incident again shows that tariffs are a negotiating tool, but markets need to price in some premium for the volatility that such announcements will bring,” wrote Mohit Kumar, a strategist at Jefferies International Ltd.
Tech will remain in focus for traders this week, with four of the Magnificent Seven stocks — Apple Inc., Microsoft Corp., Meta Platforms Inc. and Tesla Inc. — scheduled to release results.
It’s also a high-stakes period for Europe as firms comprising about 21% of the Stoxx 600 Index’s market value are set to report. ASML is among the most high-profile, with LVMH, SAP SE and Shell Plc also on the earnings roster.
“With DeepSeek likely to stay in investors’ minds, muted gains for beats and severe punishment for misses may be the outcome of the earnings season,” said Patrick Armstrong, chief investment officer at Plurimi Wealth LLP.
ASML Earnings Are Make-or-Break for Europe’s Rally in Key Week
In China, AI-related stocks reacted positively, with mainland-listed Merit Interactive Co. among those surging by their daily limits.
Merit has some of the clearest links to DeepSeek after stating in an earlier filing that it had incorporated the homegrown AI firm’s model into marketing. In Hong Kong, the Hang Seng Tech Index climbed as much as 2% ahead of Lunar New Year holidays this week.
Markets in Taiwan, South Korea, and Australia are closed for a holiday Monday.
Key events this week:
ECB President Christine Lagarde and others speak, Monday
