DeepSeek – ‘Sputnik moment’ sparks rout in AI-linked stocks
- Tech stocks sink, Nvidia drops sharply
- China’s DeepSeek AI assistance surges in popularity
- Nervous investors seek safe havens, dollar falls
NEW YORK/LONDON/SINGAPORE, Jan 27 (Reuters) – Global investors dumped tech stocks on Monday as they worried that the emergence of a low-cost Chinese artificial intelligence model would threaten the dominance of AI leaders like Nvidia (NVDA.O), evaporating $593 billion of the chipmaker’s market value, a record one-day loss for any company on Wall Street.
Last week, Chinese startup DeepSeek launched a free AI assistant that it says uses less data at a fraction of the cost of incumbent services. By Monday, the assistant had overtaken U.S. rival ChatGPT in downloads from Apple’s (AAPL.O), app store.
This led the tech-heavy Nasdaq (.IXIC), to fall 3.1% on Monday. Nvidia was the Nasdaq’s biggest drag, with its shares tumbling just under 17% and marking a record one-day loss in market capitalization for a Wall Street stock, according to LSEG data.
Nvidia’s market-cap loss on Monday was more than double the previous one-day record, set by Nvidia last September.
The Nasdaq’s next-biggest drag was chipmaker Broadcom Inc (AVGO.O), which finished down 17.4%, followed by ChatGPT backer Microsoft (MSFT.O), which fell 2.1% and then Google parent Alphabet (GOOGL.O), which ended down 4.2%.
he Philadelphia semiconductor index (.SOX), tumbled 9.2%, for its biggest percentage drop since March 2020 and its biggest decliner was Marvell Technology (MRVL.O), which tumbled 19.1%.
U.S. equity declines followed a selloff that started in Asia, with Japan’s SoftBank Group (9984.T), finishing down 8.3%, and moved through Europe where ASML (ASML.AS), fell 7%.
Brian Jacobsen, chief economist at Annex Wealth Management in Menomonee Falls, Wisconsin, said :
If it’s true that DeepSeek is the proverbial ‘better mousetrap,’ that could disrupt the entire AI narrative that has helped drive the markets over the last two years,
“It could mean less demand for chips, less need for a massive build-out of power production to fuel the models, and less need for large-scale data centers.”
The hype around AI has powered a huge inflow of capital into equities in the last 18 months, inflating valuations and lifting stock markets to new highs.
As recently as Wednesday, U.S. AI-related stocks had rallied sharply after President Donald Trump announced a private-sector plan for what he said would be a $500 billion investment in AI infrastructure through a joint venture known as Stargate.
Since then, SoftBank announced a $19 billion commitment to help fund the Stargate venture whose other backers include ChatGPT developer OpenAI and Oracle , whose shares finished down 13.8% on Monday.
Trump on Monday said that DeepSeek should be a “wakeup call” and could be a positive development.
In their flight from risk on Monday, investors sought out safe-haven government bonds and currencies. The benchmark U.S. Treasury 10-year yield fell to 4.53% while in currencies Japan’s yen and the Swiss franc rallied against the U.S. dollar.
The increased volatility in tech stocks will prompt banks to adjust their risk management, potentially holding fewer shares or managing positions more carefully as clients unwind their holdings, said one trading executive who declined to be identified discussing his company’s actions.
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DeepSeek – ‘Sputnik moment’ sparks rout in AI-linked stocks, source
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