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On Tue, 28 Jan, 12:02 AM UTC
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Frankfurt equities close: AI competition from China slows down Dax after record
FRANKFURT (dpa-AFX) - The latest success of the Chinese start-up DeepSeek in the field of artificial intelligence (AI) dampened the mood on the German stock market on Monday. The Dax had fallen by almost 1.5 percent in the meantime before recovering somewhat and ultimately ending trading 0.53 percent lower at 21,282.18 points. The leading German index had only reached a record high of 21,520 points on Friday. The VDax, a so-called fear barometer, rose sharply at the start of the week. It reflects the uncertainty among investors. The MDax of mid-caps fell by 0.02% to 26,104.10 points. DeepSeek's latest AI model is said to be cost-efficient and may require fewer powerful chips than the large models of established competitors. Although experts do not want to overestimate the latest developments, they still see risks for the US dominance in the trend topic of AI. "The euphoria surrounding artificial intelligence seems like a house of cards in the wind and the high valuations are being critically scrutinized," commented the experts at Index-Radar with regard to the major technology companies in the United States. Some of them came under significant pressure in early US trading. In the coming days, Microsoft, Apple and Meta, among others, will present quarterly figures. Interest rate decisions are also due from the US Federal Reserve and the European Central Bank. "The big question for this week is whether there will be a second sell-off after the quarterly figures and the central bank meetings or whether the bargain hunters already feel so confident that they don't want to miss out on this opportunity and are already back in rally mode," wrote Konstantin Oldenburger, market analyst at CMC Markets. A slight improvement in the Ifo business climate at the start of the year faded into the background in the face of AI concerns. While the assessment of the current economic situation brightened somewhat, the companies surveyed by the Ifo Institute were even more pessimistic about the future. "Even with the prospect of the upcoming general election, there is no sign of a spirit of optimism in the German economy," commented Ulrich Kater, Chief Economist at Dekabank./niw/he
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Germany's business climate mixed, European markets sink on AI reset
Germany's business climate improved slightly in January, but expectations fell to a one-year low. Concerns over bureaucracy and US tariffs continue to weigh on the German economy. Markets slumped as China's DeepSeek AI shook the tech sector. The German business climate showed a mixed picture in January, with a slight improvement in current conditions but a decline in expectations, which have dropped to their lowest level in a year. According to the latest report from the ifo Institute, the overall ifo Business Climate index edged up to 85.1 in January from 84.7 in December, exceeding expectations of 84.7. However, the index remains near its lowest levels since 2022, when the country was grappling with an energy crisis. The ifo Current Conditions index rose to 86.1 in January from 85.1 in December, surpassing forecasts of 85.4 and reaching its highest level since August. Meanwhile, the ifo Expectations index fell to 84.2 from 84.4, marking its lowest reading since January 2024. "Companies continue to be pessimistic," ifo Institute president Clemens Fuest said. Germany's regulatory burdens under scrutiny In recent days, the ifo Institute has urged policymakers to address bureaucratic hurdles that slow business expansion, advocating for market-based instruments over excessive regulation. "To avoid the costs of excessive bureaucracy in Germany, policymakers should rely more on market-based instruments when it comes to new legislation. Market-based approaches usually entail less bureaucracy, as they are based on general rules and require less state control and monitoring," said Sarah Necker, Director of the Ludwig Erhard ifo Centre for Social Market Economy. Germany is preparing for early elections in February, with its economy remaining sluggish. Whether a new government can drive a recovery will depend on its commitment to reform. "The number of regulations and the costs they incur for companies have risen continuously in recent years. They now amount to almost €30 billion per year," Necker added, stressing the need for transparency in evaluating regulatory costs. Trade policy concerns amid US tariff threats The ifo Institute also weighed in on international trade, a particularly sensitive issue as the new US administration under Donald Trump threatens Europe with tariffs. According to ifo trade expert Lisandra Flach, Germany and the EU must pursue more trade agreements and avoid jeopardising negotiations with excessive sustainability demands. "The global dynamic has changed fundamentally. If Europe wants to continue to play a role as a global player in the future, it should recognise the new geopolitical situation and adopt a more pragmatic approach to trade agreements," Flach stated. Markets tumble as China's DeepSeek shakes AI landscape The release of the German business confidence report was not the main driver of Monday's sharp market declines. Instead, a major shock to the tech sector came from China's DeepSeek, which unveiled DeepSeek-R1, a reasoning model that outperforms OpenAI's GPT-4o at a fraction of the cost. This development has triggered panic among semiconductor stocks as China's AI capabilities now rival the best US models while using less powerful and cheaper chips as well as energy. Futures on the Nasdaq 100 tumbled more than 3% by 10:20 CET, with Nvidia Corp plunging 8% in premarket trading. Dutch semiconductor giant ASML Holding NV plummeted over 9%, heading for its worst session since mid-October, when a weak earnings outlook sent shares down 15.5%. The Euro STOXX 50 index declined by 1.2%, with ASML Holding, Schneider Electric SE falling 7.8%, and Siemens AG losing 4.5% among the worst performers. Germany's DAX 40 also dropped 1.2%, weighed down by heavy losses in Siemens Energy, which plunged 17%, while Infineon Technologies fell 4.5%, Rheinmetall declined 3%, and SAP slipped 1.5%.
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DeepSeek's new AI model outperforms competitors at lower cost, causing market turbulence and raising questions about US AI dominance. Meanwhile, Germany's business climate shows mixed signals amidst economic challenges.
In a significant development that has sent shockwaves through global financial markets, Chinese artificial intelligence (AI) startup DeepSeek has unveiled a groundbreaking AI model that threatens to disrupt the established order in the tech industry. The company's latest offering, DeepSeek-R1, has demonstrated capabilities that rival or surpass those of industry leaders like OpenAI's GPT-4, but at a fraction of the cost 1.
The news of DeepSeek's achievement has had an immediate and profound impact on global stock markets. The Nasdaq 100 futures tumbled more than 3%, with semiconductor giant Nvidia experiencing an 8% plunge in premarket trading. European markets also felt the tremors, with the Euro STOXX 50 index declining by 1.2% 2.
In Germany, the DAX index, which had recently reached a record high of 21,520 points, fell by 0.53% to close at 21,282.18 points. The market volatility was reflected in the sharp rise of the VDax, often referred to as the "fear barometer" 1.
DeepSeek's AI model is reported to be not only cost-efficient but also less demanding in terms of computational power. This development suggests that fewer powerful chips may be required to run large AI models, potentially disrupting the semiconductor industry and challenging the current US dominance in AI technology 1.
The AI disruption comes at a time when the German economy is facing its own challenges. The Ifo Business Climate index showed a mixed picture in January, with a slight improvement in current conditions but a decline in expectations to their lowest level in a year 2.
As the tech sector grapples with this new competitive landscape, attention is turning to upcoming quarterly reports from major US tech companies and imminent interest rate decisions from the Federal Reserve and European Central Bank. Market analysts are speculating whether these events will trigger further sell-offs or if investors will seize the opportunity to buy the dip 1.
The AI shakeup occurs against a backdrop of ongoing economic challenges in Germany and Europe. Concerns over bureaucratic hurdles, potential US tariffs, and the need for more trade agreements are weighing on business sentiment. As Germany prepares for early elections, the ability of a new government to drive economic recovery will be closely watched 2.
The developments in AI technology and their market impact underscore the interconnectedness of global tech innovation, economic policies, and financial markets. As the dust settles on this latest disruption, the tech industry and policymakers alike will be reassessing strategies to maintain competitiveness in the rapidly evolving AI landscape.
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The DAX and EuroStoxx indices experienced further declines as investors grapple with worries about artificial intelligence and potential recession. The technology sector faced particular pressure following Nvidia's cautious outlook.
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The German stock market index DAX remains stable near record highs as investors await Nvidia's earnings report and assess various economic indicators. The market shows resilience amid mixed global cues.
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European technology stocks tumble following the release of a low-cost AI model by Chinese startup DeepSeek, raising concerns about the profitability of established AI companies and the need for expensive technology infrastructure.
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DeepSeek, a Chinese AI startup, launches a rival to ChatGPT, claiming better performance at lower costs. This development shakes U.S. tech stocks and raises questions about the sustainability of the AI boom.
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The release of DeepSeek's AI model by a Chinese startup has sent shockwaves through global markets, raising questions about U.S. technological supremacy and the necessity of massive GPU investments for powerful AI.
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