Chinese AI Startup DeepSeek Challenges U.S. Tech Giants, Rattles Global Markets

Monitoring dollar, DeepSeek and China's PMIs

A big week for world markets kicks off in Asia on Monday with investors still navigating the blizzard of headlines around U.S. President Donald Trump's likely economic agenda, while trying to gauge whether the "U.S. exceptionalism" narrative may be losing its luster. The dollar fell 1.8% last week, its worst week since November 2023. If the greenback is consolidating, it shouldn't really be a surprise - it hit a two-year high earlier this month and hedge fund net 'long' position was the biggest in nine years. The dollar and U.S. stocks have been closely correlated, lifted by the huge wave of global capital inflows as investors bet heavily on the American AI, tech, growth and returns boom. But if the dollar's slide is a sign that the "U.S. exceptionalism" flame is starting to flicker, is Wall Street primed for a cooling off period too? The S&P 500 hit a new high last week and the Nasdaq came close. Index levels are historically high, valuations are stretched, and big event risk looms this week in the shape of the Fed's policy meeting and 'Big Tech' earnings. Scrutiny on U.S. tech is intensifying as ripples from a Chinese AI startup called DeepSeek spread. DeepSeek recently launched a free, open-source AI model it claims is at least the equal of more established models like ChatGPT on many levels, but built at a fraction of the cost. It's early days but if this shines a critical light on the huge sums being spent on AI by U.S. tech firms, Wall Street could wobble. The Asian calendar on Monday is dominated by China's 'official' manufacturing and service sector purchasing managers index reports for January. A Reuters poll suggests the manufacturing PMI will be unchanged from the previous month at 50.1. On the one hand, that would represent the fourth straight month of expansion in the sector. It would also indicate almost no growth at all for the second month in a row. Data on Friday showed Chinese state-owned firms' profits last year virtually evaporated, rising only 0.4% on the previous year. Wider industrial sector profits figures are due this week, perhaps as early as Monday, and are expected to confirm that 2024 was the worst year in decades. Investors will give their second day verdict on Friday's Bank of Japan's rate hike. The initial take seemed to be that it was a 'hawkish hike', but Japanese money markets are still pricing in only another 25 basis points of tightening this year, unchanged from pre-Friday levels. This suggests BOJ guidance was actually pretty neutral, and Japanese stock futures are pointing to a strong rise on Monday. Meanwhile, South Korean markets will be sensitive to the news that prosecutors on Sunday indicted impeached President Yoon Suk Yeol on charges of leading an insurrection with his short-lived imposition of martial law on Dec. 3. Here are key developments that could provide more direction to markets on Friday: (Reporting by Jamie McGeever; Editing by Diane Craft)

Morning bid: China's AI challenger puts investors on edge

A look at the day ahead in European and global markets from Kevin Buckland For two years, investors and analysts have pondered what - if anything - could take some of the steam out of the AI stocks rally. China may have just come up with the answer. Futures in the tech-centric U.S. Nasdaq Composite index had tumbled 1.8% by around midday Monday in Asia, as investors weighed the implications of Chinese startup DeepSeek's release of a rival to ChatGPT that it claims is cheaper and may on some metrics be better. Pan-European STOXX 50 futures slipped half a percent. Trump was also roiling currency markets again at the start of the week, hitting Colombia with punitive levies and sanctions for turning away military planes carrying deported migrants. Just hours later, Washington was announcing an about-face from Bogota, which agreed to all of Trump's terms. Colombia's peso hadn't traded in Asian time but Mexico's currency slid as much as 1.2% and Canada's loonie weakened 0.3%. The offshore yuan eased 0.4%. Compared with Trump's strong-arm tactics over immigration, however, his approach to China so far has been more nuanced. Although he has threatened 10% tariffs from Feb. 1, that was a far cry from the 60% duties he pledged on the campaign trail and less even than the 25% levies that neighbours Canada and Mexico may face on the same date. Maybe it's the rekindled bromance with Xi Jinping: Trump went so far as to say he'd rather not resort to tariffs in dealing with Beijing, after what he called a "good, friendly conversation" with China's leader by phone earlier this month. As for DeepSeek's roiling of tech share prices, the jury is still out on how much of a threat it may actually pose to its U.S. rivals, but market players look like they'd rather sell first and hear the verdict later. Ironically, it's a challenger of America's own making, after years of chip-related sanctions and now renewed tariff threats under President Donald Trump, which encouraged a self-sufficiency push by Beijing that is now bearing fruit. Trump has made no mention of the potential threat to his own half-trillion-dollar AI initiative but traders may be keeping a close eye on his Truth Social account. The DeepSeek news could also focus more attention than usual on Big Tech's quarterly health check this week, with four of the so-called Magnificent Seven reporting financial results: Apple, Microsoft, Facebook-owner Meta Platforms and Tesla. Also this week, a host of central banks globally will set policy, including the Fed on Wednesday and the ECB a day later. For Asia, though, a lot of this happens in the vacuum of lunar new year holidays. Mainland Chinese bourses will be closed from tomorrow through Tuesday of next week. Other developments that could influence markets on Monday: -ECB President Lagarde speaks at Holocaust remembrance event in Frankfurt

Asia equities slide with US stock futures on China's AI push; dollar firms

TOKYO (Reuters) - U.S. stock futures and Asian shares outside China slumped on Monday as investors weighed the implications of Chinese startup DeepSeek's launch of a free, open-source artificial intelligence model to rival OpenAI's ChatGPT. Meanwhile, the dollar rose after U.S. President Donald Trump slapped Colombia with retaliatory levies and sanctions for turning away military aircraft carrying deported migrants. U.S. Nasdaq Composite futures tumbled 1.8% as of 0158 GMT and S&P 500 futures sank 0.9%. Japan's Nikkei dropped 0.3%, reversing an initial advance. New Zealand's equity benchmark slipped 0.6% and Singapore's Straits Times index lost 0.2%. At the same time, Hong Kong's Hang Seng rallied 0.9% and mainland blue chips added 0.2%, even after data showed a surprise contraction in manufacturing this month. DeepSeek "has raised the spectre of disruption in the tech landscape, with its emergence suggesting that China can continue to make strides in the AI race despite US restrictions," Yeap Jun Rong, a strategist at IG, wrote in a note. It "seems to instil some concerns over U.S. tech dominance", putting "tech companies' lofty valuation back under scrutiny", he said. In currencies, the dollar jumped 0.3% against the Chinese yuan in offshore trading, and rallied 0.4% versus the Aussie and 0.5% versus the New Zealand dollar, with the antipodean currencies tending to act as more liquid proxies for China's currency due to close trade ties. The Mexican peso slumped 1% and the Canadian dollar eased 0.3%, although the Colombian peso rallied 1.2%. DOLLAR STRENGTH FLEETING China, Mexico and Canada face a nervy wait with Trump last week earmarking Feb. 1 for additional tariffs on the United States' top trading partners. However, Nomura strategist Naka Matsuzawa expects dollar strength on tariff worries to be fleeting. "As a trend, Trump is taking a more realistic, less aggressive stance on tariffs," Matsuzawa said. "Bottom line: Trump doesn't want big tariffs because he's worried about inflation," he said. "The dollar will be overall weaker." Trump last week soothed market concerns by saying he wanted to avoid tariffs on China, and said he could reach a trade deal. The volatility across asset classes kicks off a crucial week for markets that will see the Federal Reserve and European Central Bank - among others - set monetary policy. At the same time, many bourses have extended holidays this week for the lunar new year. Among them, South Korea is closed Monday and Tuesday, while Taiwan is shut all week. Mainland China is away from Tuesday until Wednesday of next week. Australia is closed on Monday for Australia Day. Meanwhile, crude oil prices slumped after Trump on Friday reiterated his call for OPEC to cut oil prices. Brent crude futures dropped 1.2% to $77.60 a barrel, while U.S. West Texas Intermediate crude lost 1.2% to $73.78 a barrel. (Reporting by Kevin Buckland; Editing by Saad Sayeed)

AI, aye, aye

(Reuters) - A look at the day ahead in U.S. and global markets by Amanda Cooper, Finance and Markets Breaking News Editor, Europe. Stocks are getting hammered on Monday, with hefty declines in the technology sector as artificial intelligence big guns like Nvidia, Qualcomm and Intel took a dive. The trigger was a burst of hype around the launch last week of Chinese startup DeepSeek's AI rival to ChatGPT. Not only is DeepSeek's app now top of the leaderboard on the Apple Store in terms of downloads, online searches for "DeepSeek" have exploded in the last 7 days, while those for its larger competitor have remained stagnant. With four out of the so-called "Magnificent Seven" due to report earnings this week, the rise of DeepSeek as a possible alternative to Western-led AI has served as a dose of reality. Investors have been willing to shell out for these stocks' sky-high valuations on their promises to deliver juicy returns with their investments in AI. The Magnificent Seven, a group comprising Wall Street's biggest companies by market capitalisation that includes Apple, Microsoft, Nvidia and Facebook parent Meta, now account for a third of global market value, compared with around a fifth two years ago, according to asset manager Federated Hermes. DeepSeek rolled out an open-source reasoning model called DeepSeek-R1 on Monday that it said rivalled OpenAI's o1 on several performance benchmarks. Tests last month on its V3 large language model outperformed those of OpenAI and Meta, with a smaller development budget and plans to charge users a lot less. OpenAI kicked off the race in AI development after it launched ChatGPT in November 2022. But it was Nvidia, whose supercomputing chips power a lot of AI applications, that really ignited the rally in the stock market when it delivered bumper earnings in May 2023 that sent its valuation soaring above $1 trillion. Since then, Nvidia shares have risen by 250%. Investors have been happy to let its Mag-7 companions ride higher on its coattails, but only to a point. Apple shares are up just 26% in that time, while Microsoft is up 34%. Meta has been a bigger winner since then, up 145%. U.S. President Donald Trump last week unveiled a plan for private-sector investment of $500 billion in AI infrastructure aimed at outpacing rival nations. Oracle, one of the companies involved in the joint venture, along with Japan's SoftBank and OpenAI, saw its shares jump 7% and the second-biggest daily traded volume in its stock in a year. Slower roll-outs of AI applications, higher costs and other hiccups have tested investors' faith in Wall Street's dominant players in the sector, but have not curbed their enthusiasm. Now, competitors are starting to snap at their heels. China's ByteDance, the owner of TikTok, last week released an update to its flagship AI model - a direct challenger to OpenAI - while in the world of smartphones, Samsung last week unveiled its newest Galaxy S25 smartphones, powered by Qualcomm's chips and Google's AI model, which it hopes can help pump up sales and fend off both Apple and Chinese rivals. Apple, Microsoft and Meta will report quarterly results this week, along with electric car maker Tesla. Key developments that should provide more direction to U.S. markets later on Monday:

Asia stocks rattled by Trump jitters; China shares mixed amid weak PMI, AI bets By Investing.com

Investing.com-- Most Asian stocks fell on Monday after U.S. President Donald Trump's imposition of trade tariffs on Colombia rattled risk appetite with the possibility of more such moves. Chinese markets were a mixed bag, as investors bought some local technology names on optimism over DeepSeek R1- a new artificial intelligence model that could potentially disrupt development in the sector. But further gains in China were stymied by weaker-than-expected purchasing managers index data, which highlighted a sustained decline in China's economy. Regional markets took a weak lead-in from Wall Street, with U.S. stock index futures falling in Asian trade as speculation over DeepSeek battered major technology stocks, especially Nvidia (NASDAQ:NVDA). The stock sank over 5% in 24 hour markets, RobinHood data showed. Hong Kong's Hang Seng index was an outlier among its Asian peers on Monday, rising 0.6% on gains in heavyweight internet stocks. Majors Baidu (NASDAQ:BIDU) Inc (HK:9888), Alibaba Group Holding Ltd (HK:9988) and Tencent Holdings Ltd (HK:0700) rose between 0.9% and 3.5%. Sentiment towards Chinese internet stocks was boosted by the release of DeepSeek R1, a large-language model that claimed to rival offerings from OpenAI and Meta (NASDAQ:META) at a fraction of the cost. The LLM ramped up hopes that Chinese firms could offer competitive AI products despite a lack of access to cutting-edge AI tech from majors such as Nvidia. Major Chinese chipmaking stocks- such as Semiconductor Manufacturing International Corp (HK:0981) and Sunny Optical Technology Group Co Ltd (HK:2382) had rallied last week on this notion, although they fell amid some profit-taking on Monday. China's Shanghai Shenzhen CSI 300 and Shanghai Composite indexes were less upbeat, rising only marginally. Sentiment towards broader Chinese markets was dented by softer-than-expected PMI data for January, which showed an unexpected contraction in manufacturing activity and a sharp slowdown in non-manufacturing growth. The reading indicated that China's economy was struggling despite recent supportive measures from Beijing, and that the government will likely have to dole out more support. The prospect of higher U.S. trade tariffs also bodes poorly for China. Chinese markets will be closed for the week-long Lunar New Year holiday from Tuesday. Broader Asian markets retreated on Monday, although regional trading volumes were muted before several regional holidays this week. Beyond China, markets in Singapore, South Korea, and Hong Kong will also be closed this week. Risk appetite was rattled by Trump imposing 25% trade tariffs on Colombia, which spurred fears that he could also make good on his tariff threats against Canada, Mexico, and China. Broader market focus is also on a Federal Reserve meeting this week, where the central bank is widely expected to keep rates steady.

China's DeepSeek's rival to ChatGPT puts tech valuations in question

Image: Getty Images/ For illustrative purposes US stock futures and Asian shares outside China slumped on Monday as investors weighed the implications of Chinese startup DeepSeek's launch of a free, open-source artificial intelligence model to rival OpenAI's ChatGPT. Meanwhile, the dollar rose after US President Donald Trump threatened Colombia with retaliatory levies and sanctions for turning away military aircraft carrying deported migrants before a last-minute deal was agreed. US Nasdaq Composite futures tumbled 2.3 per cent as of 06.34 GMT and S&P 500 futures sank 1.3 per cent. Japan's Nikkei dropped 0.9 per cent, reversing an initial advance. New Zealand's equity benchmark slipped 0.2 per cent and Singapore's Straits Times index eased 0.1 per cent. At the same time, Hong Kong's Hang Seng rallied 1 per cent and mainland blue chips added 0.1 per cent, even after data showed a surprise contraction in manufacturing this month. Pan-European STOXX 50 futures dropped 0.9 per cent. DeepSeek has the potential to disrupt the tech landscape DeepSeek "has raised the spectre of disruption in the tech landscape, with its emergence suggesting that China can continue to make strides in the AI race despite US restrictions," Yeap Jun Rong, a strategist at IG, wrote in a note. It "seems to instil some concerns over US tech dominance", putting "tech companies' lofty valuation back under scrutiny", he said. In currencies, the dollar advanced 0.4 per cent against the Chinese yuan in offshore trading, and gained 0.4 per cent versus the Aussie and the New Zealand dollar, with the antipodean currencies tending to act as more liquid proxies for China's currency due to close trade ties. The Mexican peso slumped about 0.7 per cent and the Canadian dollar eased 0.2 per cent. The Colombian peso had yet to trade against the dollar but had rallied 3.4 per cent over the previous three sessions. The euro eased 0.2 per cent to $1.0461. Sterling edged 0.1 per cent lower to $1.2457. The yen was little changed at 156.13 per dollar. Dollar strength fleeting China, Mexico and Canada face a nervy wait with Trump last week earmarking February 1 for additional tariffs on the US' top trading partners. However, Nomura strategist Naka Matsuzawa expects dollar strength on tariff worries to be fleeting. "As a trend, Trump is taking a more realistic, less aggressive stance on tariffs," Matsuzawa said. "Bottom line: Trump doesn't want big tariffs because he's worried about inflation," he said. "The dollar will be overall weaker." Trump last week soothed market concerns by saying he wanted to avoid tariffs on China, and said he could reach a trade deal. The volatility across asset classes kicks off a crucial week for markets that will see the Federal Reserve and European Central Bank - among others - set monetary policy. At the same time, many bourses have extended holidays this week for the Lunar New Year. Among them, South Korea and Taiwan were already closed on Monday. Markets in mainland China are shut from Tuesday and do not reopen until February 5. Australia was closed on Monday for Australia Day. Meanwhile, crude oil prices slumped after Trump on Friday reiterated his call for OPEC to cut oil prices. Brent crude futures dropped 0.8 per cent to $77.85 a barrel, while US West Texas Intermediate crude lost 0.9 per cent to $74.00 a barrel. Gold sank 0.7 per cent to $2,753 per ounce. Leading cryptocurrency bitcoin slumped more than 5 per cent to below $100,000 for the first time in a week, and was last at $99,215.

Nasdaq futures tumble as China's AI push rattles Big Tech

(Reuters) - Futures linked to the tech-heavy Nasdaq tumbled on Monday as the overwhelming popularity of an inexpensive Chinese artificial intelligence model sparked a selloff in AI-related shares, with megacap stocks including Nvidia the worst hit. Chinese startup DeepSeek has rolled out a free assistant it says uses lower-cost chips and less data, seemingly challenging a widespread bet in financial markets that AI will drive demand along a supply chain from chipmakers to data centers. "It is far too early to describe DeepSeek as an existential threat to U.S.-based AI solutions," Richard Hunter, head of markets at interactive investor, said. "It will almost certainly put the cat among the pigeons as investors scramble to assess the potential damage it could have on a burgeoning industry which has powered much of the gain seen in the main indices over the past couple of years." DeepSeek's AI Assistant on Monday overtook rival ChatGPT to become the top-rated free application available on Apple's App Store in the United States. Nvidia, the poster child of AI, dropped 6.9% in premarket trading, while other chipmakers such as AMD and Micron Technology fell 3.7% and 6.4%, respectively. Microsoft and Meta Platforms were down 3.3% each. Both are set to report earnings later this week, along with Apple and Tesla. Google-parent Alphabet fell 3.2%, and Apple lost 1.4%. AI server makers Dell Technologies and Super Micro Computer slid about 8% each. At 4:06 a.m. ET, Dow E-minis were down 472 points, or 1.06%, S&P 500 E-minis were down 120.25 points, or 1.96%, and Nasdaq 100 E-minis were down 667 points, or 3.04%. Also adding some caution to global markets, 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. On Wednesday, the U.S. Federal Reserve's first interest rate decision of the year is expected, with markets widely expecting the central bank to hold its lending rate steady. The December reading of the personal consumption expenditures (PCE) is due on Friday, a crucial metric in assessing the inflation trajectory. Markets have been on edge lately about Trump's proposed tariffs, which could exacerbate inflationary pressures and slow Fed rate cuts, after he referred to trade policy multiple times last week without providing concrete details of his plans. All three major indexes clocked weekly gains last week despite a pullback on Friday, with the S&P 500 retreating from all-time highs. Energy major Exxon Mobil, United Parcel Service and planemaker Boeing would be some of the other industry leaders reporting their quarterly results later this week. (Reporting by Shashwat Chauhan in Bengaluru; Editing by Shounak Dasgupta)

US stock futures sink as investors weigh China challenge to US dominance in AI, Nvidia drops 12%

Chipmakers Nvidia and Broadcom both lost around 12%, while software giant Oracle lost 8%. Microsoft slid more than 6% and Amazon was down 4.5%. Google parent company Alphabet and Facebook parent Meta each lost about 3.5%.Investors dumped technology stocks in premarket trading Monday, sending US indexes sharply lower after Chinese artificial intelligence startup DeepSeek demonstrated a chatbot that it says rivals the top versions from OpenAI and Google for a fraction of the cost. 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. Chipmakers Nvidia and Broadcom both lost around 12%, while software giant Oracle lost 8%. Microsoft slid more than 6% and Amazon was down 4.5%. Google parent company Alphabet and Facebook parent Meta each lost about 3.5%. Analyst Dan Ives of Wedbush Securities said that while the DeepSeek AI technology is impressive, the U.S. tech sector is still far ahead of China with regard to AI infrastructure. "Launching a competitive (large language) model for consumer use cases is one thing," Ives wrote in a note to clients. "Launching broader AI infrastructure is a whole other ballgame and nothing with DeepSeek makes us believe anything different." In early European trading, Germany's DAX dropped 1.1% to 21,178.37, while the CAC 40 in Paris shed 0.8% to 7,863.70. Britain's FTSE 100 declined 0.3% to 8,473.33. In Asia, Hong Kong's Hang Seng gained 0.7% to 20,197.77, with shares in ecommerce giant Alibaba gaining 2.9% while search engine company Baidu jumped 4.9%. The Shanghai Composite index fell, however, after a survey of manufacturers showed export orders in China dropping to a five-month low. It edged 0.1% lower to 3,250.60. The official manufacturing purchasing managers index fell to 49.1 in January from 50.1 in December, slipping into contractionary territory on a scale where 50 and above indicates expansion. New orders and construction PMIs also fell. Tokyo's Nikkei 225 gave up 0.9% to 39,565.80, extending losses after the Bank of Japan raised its benchmark interest rate to 0.25%, its highest level since 2008. Computer chip-related shares saw big declines, with Tokyo Electron down 4.9% and test equipment maker Advantest sinking 8.6%. The U.S. dollar was steady against the Japanese yen, at 155.45 yen, down from 155.72. The euro slipped to $1.0477 from $1.0483. In Bangkok, the SET fell 0.7%. Trading was closed in many other Asian markets due to holidays. The Federal Reserve holds its latest policy meeting later this week. Traders don't expect recent weak data to push the Fed to cut its main interest rate. They're virtually certain the central bank will hold steady, according to data from CME Group.

Nasdaq futures tumble over 3% as China's AI push rattles Big Tech

Futures linked to the tech-heavy Nasdaq tumbled on Monday as the overwhelming popularity of an inexpensive Chinese artificial intelligence model sparked a selloff in AI-related shares, with megacap stocks including Nvidia the worst hit. Chinese startup DeepSeek has rolled out a free assistant it says uses lower-cost chips and less data, seemingly challenging a widespread bet in financial markets that AI will drive demand along a supply chain from chipmakers to data centers. "It is far too early to describe DeepSeek as an existential threat to U.S.-based AI solutions," Richard Hunter, head of markets at interactive investor, said. "It will almost certainly put the cat among the pigeons as investors scramble to assess the potential damage it could have on a burgeoning industry which has powered much of the gain seen in the main indices over the past couple of years." DeepSeek's AI Assistant on Monday overtook rival ChatGPT to become the top-rated free application available on Apple's App Store in the United States. Nvidia, the poster child of AI, dropped 6.9% in premarket trading, while other chipmakers such as AMD and Micron Technology fell 3.7% and 6.4%, respectively. Microsoft and Meta Platforms were down 3.3% each. Both are set to report earnings later this week, along with Apple and Tesla. Google-parent Alphabet fell 3.2%, and Apple lost 1.4%. AI server makers Dell Technologies and Super Micro Computer slid about 8% each. At 4:06 a.m. ET, Dow E-minis were down 472 points, or 1.06%, S&P 500 E-minis were down 120.25 points, or 1.96%, and Nasdaq 100 E-minis were down 667 points, or 3.04%. Also adding some caution to global markets, 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. On Wednesday, the U.S. Federal Reserve's first interest rate decision of the year is expected, with markets widely expecting the central bank to hold its lending rate steady. The December reading of the personal consumption expenditures (PCE) is due on Friday, a crucial metric in assessing the inflation trajectory. Markets have been on edge lately about Trump's proposed tariffs, which could exacerbate inflationary pressures and slow Fed rate cuts, after he referred to trade policy multiple times last week without providing concrete details of his plans. All three major indexes clocked weekly gains last week despite a pullback on Friday, with the S&P 500 retreating from all-time highs. Energy major Exxon Mobil, United Parcel Service and planemaker Boeing would be some of the other industry leaders reporting their quarterly results later this week.

Nasdaq Futures Slump as China's DeepSeek Sparks US Tech Concern

US stock index futures tumbled in early Asian trading hours Monday amid concerns that an artificial intelligence model from China's DeepSeek may disrupt the tech market. S&P 500 futures fell as much as 1% as of 10:12 a.m. in Hong Kong, while contracts on the Nasdaq 100 dropped as much as 1.9%. Losses extended from Friday, when US equities slumped in cash trading, cooling off after gains as President Donald Trump took office.