AI Stock Plunge: DeepSeek's Rise Sparks Market Uncertainty

S&P 500 Gains and Losses Today: AI Stocks Plunge as DeepSeek Model Gains Traction

AT&T stock pushed higher as strong subscriber additions helped the telecom giant top quarterly sales and profit forecasts. Major U.S. equities indexes were mixed to kick off the new trading week as the markets brace for the Federal Reserve's first interest-rate announcement under the second Donald Trump administration. The tech sector came under pressure Monday as an app from Chinese artificial intelligence (AI) startup DeepSeek surpassed OpenAI's ChatGPT as the most downloaded free app on Apple's (AAPL) platform. DeepSeek said its model's performance is comparable with that of U.S. AI leaders despite reportedly being developed for a fraction of the cost, raising questions about AI profitability and market leadership. The S&P 500 fell 1.5%, while tumbling tech stocks contributed to a 3.1% plunge for the Nasdaq. The Dow was the lone bright spot among the three main market gauges, edging 0.7% higher. The growing uncertainty around AI weighed on shares of power generation companies that had surged over the past year as investors anticipated massive opportunities to provide electricity for energy-intensive AI data centers. Shares of Vistra (VST), the Texas-based utility that logged the S&P 500's second-best performance in 2024, suffered the benchmark index's heaviest losses Monday, plunging 28.3%. Constellation Energy's (CEG) shares, another beneficiary of lofty expectations for nuclear-powered AI data centers, fell 20.9%. Utilities were not the only companies whose prospects have been hitched to AI infrastructure to see their share prices move lower following the DeepSeek developments. The souring outlook for AI data center opportunities also hit shares of networking equipment provider Arista Networks (ANET), which lost 22.4%. Shares of GE Vernova (GEV), the energy technology firm whose natural gas turbines have also garnered attention for their potential to meet data center power demand, dropped 21.4%. Semiconductor companies that have benefitted from investors' AI enthusiasm also took a hit on Monday. Broadcom (AVGO) shares were down 17.4%, while shares of AI chip behemoth Nvidia (NVDA) ended 16.9% lower. Shares of water and wastewater utility provider American Waterworks (AWK) jumped 6.9%, logging the top performance in the S&P 500 on Monday, after subsidiary Pennsylvania American Water secured $19.3 million in low-interest loans from the Pennsylvania Infrastructure Investment Authority. The company plans to use the funding for infrastructure improvement projects in the state, including replacing lead water service lines and enhancing wastewater treatment plants. AT&T (T) shares added 6.3% after the company reported better-than-expected revenue and net income for the fourth quarter. The telecom giant also exceeded forecasts for postpaid wireless subscriber additions during the period, boosted by demand for discounted plans that bundle 5G mobile with high-speed fiber internet service. HCA Healthcare (HCA) shares advanced 6.1%, recovering from losses posted on Friday after the hospital operator released its quarterly results. Although higher patient volumes helped HCA beat revenue and earnings per share (EPS) forecasts, the company fell short of estimates on adjusted EBITDA, which excludes direct provider payments (DPPs). On Monday, analysts at Mizuho reiterated their "outperform" rating on HCA stock, noting the unpredictability of DPPs and suggesting that the initial negative earnings reaction may have been exaggerated.

Staples, Healthcare Stocks Rise as Tech Shares Start Week In Retreat

Stocks started the week lower, pulled downward by investors' worries about the health of the AI trade. Under the hood of the S&P 500, though, there was still green to be seen. Four of the benchmark index's 11 sectors were recently rising, with two -- healthcare and consumer staples -- up more than 1%. More than 50 stocks, meanwhile, were up more than 2%, including several telecommunications shares (lifted by AT&T's (T) encouraging earnings report) and staples names like Kraft Heinz (KHC), JM Smucker (SJM) and General Mills (GIS). Still, concerns that China has made big inroads in the development of artificial intelligence technology, raising questions about the competitive marketplace and the value of Big Tech's massive spending in the sector, weighed on stocks. The S&P's information technology sector was the index's biggest decliner, off 5%, followed by energy; that was reflected in the morning's drops in stocks like Constellation Energy (CEG) and Nvidia (NVDA), both of which were making double-digit percentage moves lower. Several Big Tech companies that have been big players -- and spenders -- in AI are set to report quarterly results in the coming days, and today's volatility will likely influence the questions those companies' executives face. Apple (AAPL), Microsoft (MSFT) and Meta Platforms (META) are all due to report results this week. CNBC's Magnificent 7 index, of which Meta and Nvidia are members, was recently down about 3%.