A look at the day ahead in U.S. and global markets from Mike Dolan
Markets took a deep breath on Tuesday after Wall Street’s shock start to the week, with the emergence of cheap Chinese artificial intelligence rival DeepSeek lopping more than half a trillion dollars off what had been America’s most valuable firm Nvidia.
The tech swoon clocked some impressive milestones and the long-standing concentration of megacap stocks in S&P500 at large dragged broader indexes down sharply.
Nvidia’s 17% one-day drop marked the biggest loss in market capitalisation for a single stock ever, outstripping its own record from last September. The 9% drop in US chipmakers was the biggest in almost four years and the Nasdaq’s 3% was its biggest loss of the year so far.
Perhaps most curiously, power companies, which are expected to see higher demand from energy-intensive data centers needed to develop AI, also fell sharply. Vistra dropped 28.3% and Constellation Energy fell 20%.
Keeping it all in context, however, Nvidia’s relegation from biggest to third most valuable firm merely brought its stock back to October levels – still 94% higher than it was a year ago.
Even though the S&P500 had its biggest daily loss in a couple of weeks, the equal-weighted version of the index that evens out distortions of the handful of megacaps actually edged higher on the day and 70% of the index’s stocks rose on Monday.
Apple, which retook the top valued firm slot from Nvidia and which reports quarterly earnings on Thursday, was up 3% on Monday.
So, an unnerving day for what has been the dominant AI theme around the world over the past 18 months – but not all as terrible as it seemed. U.S. AI developers welcomed the DeepSeek readout and model and even U.S. President Donald Trump merely characterised it as a wakeup call to U.S. tech firms.
That said, the DeepSeek development reintroduces obvious questions from last summer about whether the scale of the investment spend was warranted and that will now be looked at forensically again through the unfolding earnings season.
Before Apple tees up on Thursday, Microsoft, Tesla and Meta report earnings tomorrow.
With mainland Chinese markets closed from today for the lunar new year holiday, fresh news on the saga is likely to be thin for a bit.
Ahead of Tuesday’s bell, U.S. stock futures appeared to find their feet, with Nasdaq up 0.7% and S&P futures up 0.4%. Nvidia bounced about 6% out of hours.
The ripples overseas were limited too – with Japan’s Nikkei caught in Monday’s tech slipstream and underperforming with a loss of 1%. European stocks, by contrast, were up 0.7% to a new intraday record and Hong Kong was also marginally higher.
