US Tech Smashed on AI Update – Nasdaq Down Over 3%
US tech indices, and more specifically AI-related stocks, took a huge hit in trading yesterday as updates from Chinese AI startup DeepSeek’s much cheaper technology led to a run on the market from concerned investors. There was a clear split in the US major indices, with the Dow gaining 0.65% on the day, whilst the tech-heavy S&P and Nasdaq took big hits, losing 1.46% and 3.07% respectively. US treasury yields pulled back strongly as investors moved funds to safer options, with the 2-year dropping 7.1 basis points to 4.195% and the 10-year falling 8.9 basis points to 4.532%. Oil prices also took a hit as demand concerns weighed, with Brent off 11.97% to $76.95 and WTI down 2.10% to $73.09. Gold retreated from its latest run at a new record level, down 1.03% on the day to close at $2,741.75.
Nvidia and AI Stocks in Focus
2024 market darling Nvidia took a massive hit yesterday as its share price dropped by $589bn in market cap, recording the biggest one-day loss for a single stock in trading history. The share price dropped by over 17%, beating its previous record of 9% back in September. This all came on the back of updates out of China from AI startup DeepSeek – which had been flying very much under the radar – that their AI model can give a comparable performance to other models for a fraction of the price. Traders are now expecting even more volatility in this space in the coming sessions and days, as the market rushes to seek clarity on the overall situation and assess whether recent valuations have been accurate or if there will be even bigger corrections in the market.
Volatility to Remain High in Today’s Trading Sessions
Traders are expecting market volatility to remain high as we progress through the trading day. Sharp moves in equity markets overnight have led to moves across all financial products, and traders are expecting to see plenty more headlines hitting the newswires today. There is very little on the macroeconomic event calendar for the first two sessions of the day today, but event risk does pick up once New York opens. The first major US data releases of the week are due out early in the session, with Durable Goods Orders data set to drop. Market expectations are for the headline number to show a 0.4% increase month-on-month. Later in the day, we also have the CB Consumer Confidence (expected 105.7) data, alongside the Richmond Manufacturing Index numbers (expected -13), with the Consumer Confidence number likely to have the biggest influence on markets.
