DeepSeek's assertion that powerful AI models can be built with less expensive chips than those used by U.S. firms triggered a significant market correction. Nvidia, previously the most valuable publicly traded company, experienced a massive drop in its market capitalization, while the Nasdaq Composite and S&P 500 slid. The Dow Jones Industrial Average, however, managed to advance, shielded by gains in key sectors.
Today's news from CNBC Daily Open, our international markets newsletter, reveals a significant shift in the tech sector. Investors are grappling with DeepSeek's claims that powerful AI models can be built with less expensive chips than those used by U.S. firms like OpenAI and Nvidia . This revelation sparked fears that the massive investments poured into AI by American companies might be unwarranted, potentially creating a bubble ready to burst.
DeepSeek's claims have sent shockwaves through the market, leading to a broad retreat in semiconductor and AI-related stocks. Nvidia, previously the most valuable publicly traded company, witnessed a staggering drop in its market capitalization, wiping out nearly $600 billion and pushing it to third place behind Apple and Saudi Aramco. This market correction is comparable in scale to the 2020 pandemic sell-off, according to Tom Lee, head of research at Fundstrat Global Advisors. While the tech-heavy Nasdaq Composite slid 3.07% and the S&P 500 lost 1.46%, the Dow Jones Industrial Average managed to hold its ground, advancing 0.65%. This divergence can be attributed to gains in Apple, Johnson & Johnson, and Travelers, effectively shielding the Dow from the widespread market downturn. The VIX, Wall Street's fear gauge, jumped 20.5% on Monday, reflecting investor anxiety, although it moderated from an earlier 45% surge. Despite the overall market volatility, some sectors witnessed stock price increases, suggesting a shift in investor sentiment towards defensive areas rather than a complete withdrawal from the market
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