Futures for the S&P 500 sank 2.3% before the bell, while futures for the technology-heavy Nasdaq tumbled 3.9%. Futures for the Dow Jones Industrial Average declined 0.8%.
The same tech companies that have benefitted from the AI frenzy in the past year were getting pummeled before markets even officially opened on Monday.
Hedge funds were already waiting to see if a U.S.-fostered, home-grown artificial intelligence boom would continue as China's new AI model was emerging to challenge U.S. dominance in the sector, Reuters quoted a Goldman Sachs note. Nasdaq futures slumped and technology shares slid on Monday as the swelling popularity of a Chinese discount AI model wobbled investors' faith in the profitability of what the United States has to offer.
Bucking the wider trend, AT&T rose 1.6% after its fourth-quarter wireless subscriber growth surpassed expectations, Reuters reported. Global markets were also on edge as the U.S. and Colombia pulled back from the brink of a trade war on Sunday after the White House said the South American nation had agreed to accept military aircraft carrying deported migrants.
Power companies, which are expected to see a surge in demand from energy-intensive data centers needed to develop AI technology, also slid. Constellation Energy, Vistra , and GE Vernova were down between 12.8% and 16.1%.
Nvidia alone has risen by over 200% in about 18 months and trades at 56 times the value of its earnings, compared with a 53% rise in the Nasdaq, which trades at a multiple of 16 to the value of its constituents' earnings, Reuters quoted LSEG data
The hype around AI has powered a huge inflow of capital into the equity markets in the last 18 months in particular, as investors have bought into the technology, inflating company valuations and sending stock markets to record highs, Reuters reported
“It does put a lot of scrutiny at the level of valuations,” Benedicte Lowe, equity derivatives strategist at BNP Paribas Markets 360, told Bloomberg. “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," the analyst added
Chinese artificial intelligence startup DeepSeek rocked global technology stocks Monday, raising questions over America’s technological dominance, Bloomberg reported. Buzz grew over the weekend about DeepSeek’s latest AI model being cost-effective while running on less-advanced chips, casting doubt on the validity of the rich valuations for companies like Nvidia Corp., which has led the global AI stock boom as its chips have been seen as essential to the technology.
Traders also said 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 fell as much as 10 basis points to 4.52% as investors sought haven assets.
The AI model from DeepSeek — founded by quant fund chief Liang Wenfeng — is widely seen as competitive with OpenAI and Meta Platforms Inc.’s latest offerings. Lauded by investor Marc Andreessen as “one of the most amazing and impressive breakthroughs,” DeepSeek’s app shows its work and reasoning as it addresses a user’s written query or prompt.
Nasdaq 100 futures were down 2.6% and S&P 500 futures slipped 1.4% by the European morning, and shares in Nvidia supplier Advantest fell 8.5% in Tokyo, Reuters reported. Frankfurt-listed shares of Nvidia slipped about 7%, while those of Tesla, Amazon and Meta fell more than 2% in early European trading.
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