Fundamental Analysis

Nasdaq Futures Tumble As DeepSeek Rattles Tech: Markets Wrap

Stocks slumped, with Nasdaq futures briefly losing more than 5%, on concern that a cheaper artificial intelligence model from China threatens the dominance of US technology.

Nvidia Corp. plunged 12% in US premarket trading, setting it up for the biggest drop on record in terms of market capitalization if the move holds. The volume of Nasdaq 100 futures contracts changing hands was about four times the 30-day average, according to data compiled by Bloomberg. S&P 500 futures sank as much as 3% and Bitcoin slid below $100,000.

The buzz over DeepSeek emerged over the weekend, with tech analysts saying the company’s AI model provides comparable performance to the world’s best chatbots at a fraction of the price. For investors, it put a question mark over an AI-driven rally that’s added $15 trillion to the Nasdaq 100 since 2022 and been at the heart of US equity gains.

“It does put a lot of scrutiny at the level of valuations,” said Benedicte Lowe, equity derivatives strategist at BNP Paribas Markets 360. “We are quite positive on US tech stock sector. But it puts pressure on the outlook and is a turning point for the companies at this stage in the cycle.”

In Europe, ASML Holding NV sank 10%, the biggest selloff since October, weighing on the Europe’s Stoxx 600, which was down 0.6%.

DeepSeek’s potential challenge to Silicon Valley’s business model of massive research and development spending sent ripples into other industries. Power stocks, which are typically less volatile, slid on fears of weaker electricity demand from AI data centres.

Constellation Energy Corp. fell 13% and NRG lost 10% in early trading. Makers of power equipment were also dropping, with Oklo, a developer of small nuclear reactors backed by OpenAI’s Sam Altman, down 14%.

Colombia Spat

President Donald Trump’s spat over the weekend with Colombia also added to the bearish mood in the market.

Trump had announced sweeping tariffs on the country and then abruptly changed course after reaching a deal on the return of deported migrants. The yield on 10-year US bonds was down 12 basis points at 4.50% as investors sought haven assets.

“The incident again shows that tariffs are a negotiating tool, but markets need to price in some premium for the volatility that such announcements will bring,” wrote Mohit Kumar, a strategist at Jefferies International Ltd.

Tech will remain in focus for traders, with four of the Magnificent Seven stocks — Apple Inc., Microsoft Corp., Meta Platforms Inc. and Tesla Inc. — scheduled to release results this week.

It’s also a high-stakes period for Europe as firms comprising about 21% of the Stoxx 600 Index’s market value are set to report. Chip-equipment maker ASML is among the most high-profile. LVMH, SAP SE and Shell Plc are also on the earnings roster.

“With DeepSeek likely to stay in investors’ minds, muted gains for beats and severe punishment for misses may be the outcome of the earnings season,” said Patrick Armstrong, chief investment officer at Plurimi Wealth LLP.

ASML Earnings Are Make-or-Break for Europe’s Rally in Key Week

In China, AI-related stocks reacted positively, with mainland-listed Merit Interactive Co. among those surging by their daily limits.

Merit has some of the clearest links to DeepSeek after stating in an earlier filing that it had incorporated the homegrown AI firm’s model into marketing. In Hong Kong, the Hang Seng Tech Index climbed as much as 2% ahead of Lunar New Year holidays this week.

Markets in Taiwan, South Korea, and Australia are closed for a holiday Monday.

Key events this week:

  • ECB President Christine Lagarde and others speak, Monday
  • US consumer confidence, durable goods, Tuesday
  • Chile rate decision, Tuesday
  • Australia CPI, Wednesday
  • BOE Governor Andrew Bailey speaks, Wednesday
  • US rate decision, Wednesday
  • Tesla, Microsoft, Meta, ASML earnings, Wednesday
  • Canada rate decision, Wednesday
  • Brazil rate decision, Wednesday
  • BOJ Deputy Governor Ryozo Himino speaks, Thursday
  • Eurozone consumer confidence, unemployment, GDP, Thursday
  • ECB rate decision, Thursday
  • South Africa rate decision, Thursday
  • US GDP, jobless claims, Thursday
  • Apple, Deutsche Bank, Shell earnings, Thursday
  • Japan unemployment, Tokyo CPI, Friday
  • US personal income & spending, PCE inflation, Friday
  • Colombia unemployment, rate decision, Friday

Some of the main moves in markets:

Stocks

  • S&P 500 futures fell 2.2% as of 7:29 a.m. New York time
  • Nasdaq 100 futures fell 3.8%
  • Futures on the Dow Jones Industrial Average fell 0.9%
  • The Stoxx Europe 600 fell 0.5%
  • The MSCI World Index was little changed

Currencies

  • The Bloomberg Dollar Spot Index fell 0.1%
  • The euro rose 0.2% to $1.0515
  • The British pound rose 0.2% to $1.2504
  • The Japanese yen rose 1.2% to 154.18 per dollar

Cryptocurrencies

  • Bitcoin fell 5.4% to $98,955.64
  • Ether fell 7.3% to $3,055.67

Bonds

  • The yield on 10-year Treasuries declined 10 basis points to 4.52%
  • Germany’s 10-year yield declined six basis points to 2.51%
  • Britain’s 10-year yield declined five basis points to 4.57%

Commodities

  • West Texas Intermediate crude fell 0.8% to $74.06 a barrel
  • Spot gold fell 0.3% to $2,762.78 an ounce

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Arvinth Akash

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