DeepSeek's Emergence Shakes Wall Street: AI Revolution Sparks Tech Sector Turmoil

Wall Street: DeepSeek earthquake wipes out Nasdaq 2025 earnings

The January 27 trading session will remain etched in our memories, not only because it was a bit of a "black swan" for the tech sector, but also and above all because Nvidia's -17% plunge resulted in the most gigantic value destruction (-$600 billion) ever seen on a single S&P500 or Dow Jones stock. The PHLX semiconductor index fell -9% (unprecedented since March 2020) in the wake of Arista Network -22.3%, Marvell techno -19%, Broadcom -17.4%, TSMC -13.3%, ARM -10.2%, Cadence Design -9.5%, Micron -9%... and the aforementioned Nvidia -17%. This stock market earthquake was triggered by the incredibly rapid rise of DeepSeek, a search engine packed with Artificial Intelligence, more powerful than Cat-GPT, and developed at a cost 100 times less (reasonable estimate) or 1,000 times less (depending on the Chinese narrative) than its American rival, which required tens of billions to see the light of day. Deepseek, on the other hand, is said to have been developed by a few dozen young computer scientists, using "basic" server technology, or far removed from the latest GPUs produced by Nvidia (at $40,000 or $72,000 apiece for the "Blackwells"). All this remains to be verified, but it's indisputable that the Chinese have managed to rival the US in record time and without ultra-high-end hardware... and certainly at a much lower cost. and certainly at a much lower cost. The Nasdaq fell -3.1% (its biggest drop since December 18) and erased its annual gains, the S&P 500 ended down 1.5%, the Dow Jones took advantage of its low exposure to semiconductors: it ended up 0.65%, in the wake of Apple, which recovered +3%. With a sudden wave of risk-offs (the VIX jumped +21% towards 18), the 10-year T-Bond reached its lowest level in a month at 4.495% intraday, 4.534% at 10 p.m., i.e. -6.5pts. On the statistics front, new home sales in the US rose for the second month running in December -by 3.6% to 698,000 units: a rise that was accompanied by a rebound in property prices to 427.000 dollars, compared with 402,500 dollars the previous month, while the average selling price rose to 513,600 dollars, after 485,000 dollars in November. At the current rate, it would take 8.5 months to clear the inventory of homes on the market, which reached 494,000 units in December. The week will also be marked by the Fed's monetary policy meeting on Tuesday and Wednesday (press release on 28/01 at 8pm): no rate changes are expected from the US central bank, but the comments of its boss, Jerome Powell, will be closely watched as the new President Donald Trump has made it clear that he will ask the institution to lower its rates. Copyright (c) 2025 CercleFinance.com. All rights reserved.

Wall Street: techs caught in the DeepSeek turmoil

As expected, Wall Street opened lower on Monday morning, heavily penalized by technology stocks, led by Nvidia, which are suffering from the launch of a low-cost AI application in China. At the end of the morning, the Dow Jones managed to limit its decline to 0.1% at 44,392 points, while the Nasdaq Composite dropped more than 2.5% to 19,460.2 points. The technology-weighted index, which had returned not far from its all-time highs last week, is suffering particularly from the decline of AI chip manufacturers. These are suffering from the recent presentation by DeepSeek, a Chinese start-up, of a large language model (LLM) described as being as powerful as ChatGPT, OpenAI's renowned conversational assistant, but far less costly to deploy. This development raises questions about the high valuations of AI leaders like Nvidia, but also about the value of investing in the entire AI value chain", say the Saxo teams. With a decline of almost 14%, Nvidia's stock market valuation has melted by almost $500 billion in just a few hours, falling back to third place in the world capitalization rankings, behind Apple and Microsoft. More generally, the 'Magnificent Seven' - the tech giants that have been driving the upward sequence since 2022, but whose stretched valuations are worrying investors - are precipitating the Nasdaq's fall. Among the day's losers were Alphabet, down 2.5%, Amazon, down 1%, Microsoft, down 3.5%, and Tesla, down 0.7%. Only Apple, which had corrected from the previous few weeks, benefited from some cheap buybacks and gained 2.5%. The S&P high-tech index fell by more than 5%. The only two gains of the day came from the defensive consumer staples (+1.4%) and healthcare (+1.4%) sectors. Beyond AI-related issues, some analysts are worried that a general deterioration in the US economy could have devastating effects on the stock market. 'The combination of bad news on technology and poor economic figures could inflict great damage', worries Henry Allen, analyst at Deutsche Bank. We must remember that the bursting of the dot-com bubble coincided with a period of economic slowdown, which eventually led to the US sinking into recession in 2001", he recalls. The only economic indicator of the day, new home sales, rose by 3.6% in December, a rise that was accompanied by a rebound in property prices. The climate of risk aversion is prompting a return to bonds, resulting in a marked easing in the yield on 10-year Treasuries, which at 4.55% is back towards its lowest level since the beginning of the year. Copyright (c) 2025 CercleFinance.com. All rights reserved.

Wall Street: DeepSeek shakes up the indices

The New York Stock Exchange is set to open sharply lower on Monday morning, amid concerns about the health of the US technology sector following the launch of the low-cost Chinese AI application DeepSeek. Half an hour before the opening, the S&P 500 future contract lost 2.3%, while the Nasdaq 100 fell 3.5%, heralding a sharp opening. Chinese start-up DeepSeek announced over the weekend that its conversational AI assistant had achieved results similar to those of the big American technology groups, but using far less powerful chips and with far less investment in its project. DeepSeek has been the talk of the market for several weeks now, but the pressure is on because the budgets allocated by the 'big techs' to the development of intelligence models are not slowing down, in the image of 'Stargate' and its $500 billion, as well as Meta's announcements at the end of last week", points out Alexandre Baradez, Head of Market Analysis at IG France. The question of the ability of major technology groups to recoup their gigantic investments suddenly seems to be looming over the markets, in a highly competitive environment", worries the strategist. Worryingly, DeepSeek is now the most downloaded free application on the App Store, Apple's online store, ahead of OpenAI's ChatGPT. While some professionals believe that this craze for a 'low-cost' application shows just how vulnerable the 'Magnificent Seven' are, others try to put the Chinese threat into perspective. No American company in the Forbes Global 2000 ranking is going to use DeepSeek to develop its AI infrastructure and use cases", points out Dan Ives, analyst at Wedbush Securities. "It's one thing to launch a large, competitive language model (LLM) for consumers, but quite another to commercialize a vast AI infrastructure", says the professional. Christopher Dembik, investment strategy advisor at Pictet AM, agrees: "We need to be cautious about the information revealed by DeepSeek, which has not yet been confirmed by reliable external sources. This climate of unrest in the tech sector comes at a time when giants Microsoft, Meta and Apple are due to publish their quarterly results over the next few days. With this in mind, fears surrounding the emergence of DeepSeek seem to be serving above all as a pretext for profit-taking on US tech giants, whose valuations are considered high. Investors are also showing a degree of caution on the eve of the kick-off of the Federal Reserve's monetary policy meeting. While the institution is expected to maintain a 'status quo' in view of the current economic uncertainty, the comments of its boss, Jerome Powell, will be closely watched as Donald Trump last week called for 'interest rates to fall immediately'. Market participants are also awaiting the PCE deflator for December, the Fed's preferred inflation indicator, which should show this Friday that the trajectory of prices is struggling to evolve favorably. Copyright (c) 2025 CercleFinance.com. All rights reserved.