Markets sink as China’s DeepSeek triggers Nvidia rout on Nasdaq

Dow dropped 64, but advancers modestly ahead of decliners & NAZ toppled 586.  The MLP index retreated 5+ to the 317s & the REIT index added 1 to the 404s.  Junk bond funds were flattish & Treasuries saw major buying which lowered yields (more below).  Oil was off 1+ to the 73s & gold plummeted 34 to 2744.

Dow Jones Industrials

Nvidia (NVDA) & other US technology firms plunged, part of a global sell-off as Chinese startup DeepSeek sparked concerns over competitiveness in artificial intelligence & America's leadership in the sector.  NVDA, the chip designer who has been a major beneficiary of the AI hype.  Its losses helped drive other AI trades & the broader US market lower.  DeepSeek launched a free, open-source large language model in late Dec, claiming it was developed in just 2 months at a cost of under $6M — a much smaller expense than the one called for by Western counterparts.  Last week, the company released a reasoning model that also reportedly outperformed OpenAI's latest in many 3rd-party tests.  Marc Andreesen called DeepSeek's product “one of the most amazing and impressive breakthroughs I’ve ever seen” & a “profound gift to the world.”  The Andreessen Horowitz cofounder recently gained notoriety for his support of Pres Trump.  These developments have stoked concerns about the amount of money big tech companies have been investing in AI models & data centers & raised alarm that the US is not leading the sector as much as previously believed.  “DeepSeek clearly doesn’t have access to as much compute as U.S. hyperscalers and somehow managed to develop a model that appears highly competitive,” said Srini Pajjuri, semiconductor analyst at Raymond James.  Pajjuri said DeepSeek could “drive even more urgency among U.S. hyperscalers,” a group of large computing infrastructure players like Amazon (AMZN) & Microsoft (MSFT), a Dow stock.  Specifically, the analyst said these companies can leverage their advantage from access to graphics processing units to set themselves apart from cheaper options.  GPUs are a key part of the infrastructure required to train huge AI models & NVDA is the market leader in GPUs.  NVDA stock tumbled 23.94 (17%), AMZN was off 2.35 (1%) & MSFT retreated 16.33 (4%).

Nvidia plummets 13% to lead global tech sell-off as China’s DeepSeek raises questions about AI chip spending

Treasury yields fell as investors sought out safe-haven assets amid a massive stock market sell-off.  The  10-year Treasury yield slipped 7 basis points to 4.552%, while the 2-year Treasury was last trading at 4.225% after falling close to 5 basis points.  1 basis point equals 0.01% & yields move inversely to prices.  Stocks tumbled, with NAZ being hit hard by a large decline in the technology sector.  On top of the tech rout, investors are bracing for the Federal Reserve's first meeting of the year, with a policy announcement due Wed.  The Fed is facing pressure from newly inaugurated Pres Trump, who said he expects to see interest rates come down during a keynote address at the World Economic Forum in Davos, Switzerland, last week.  “I’ll demand that interest rates drop immediately,” Trump said at the forum, speaking to an audience of global leaders.  “And likewise, they should be dropping all over the world. Interest rates should follow us all over.”  However, traders are pricing in a more than 99% chance that the Fed will leave interest rates unchanged.  At its Dec meeting, the Fed penciled in only 2 interest rate cuts in 2025.

Nvidia plummets 13% to lead global tech sell-off as China’s DeepSeek raises questions about AI chip spending

Pres Trump hit send on a Truth Social post yesterday that seemed to be the start of 25% tariffs on Colombia.  But it was all apparently over about 10 hours later, with White House press secretary Karoline Leavitt saying the South American nation "has agreed to all of President Trump's terms."  The abbreviated trade war holds several important lessons for how future conflicts might unfold ahead of a key Sat deadline for tariffs on Canada, Mexico & China.  It showed that Trump intends to use a strategy of threatening tariffs first & then asking policy questions later, with some of the core issues with Colombia apparently still to be hammered out.  It also confirmed that his administration aims to use a much-watched tariff authority from a 1977 law that grants the pres the power to declare an economic emergency & act quickly to achieve its ends.  Lastly, the episode made clear that the pres has free tariff reign.

Trump's brief trade war with Colombia has key lessons for Mexico and China

NAZ sank to lead a stock sell-off as a Chinese startup rattled faith in US leadership & profitability in AI, taking a hammer to NVDA & other Big Tech stocks.  Markets have been rattled by claims by China's DeepSeek that its AI assistant uses cheaper chips & less data than leading models, but performs equally well.  A surge in DeepSeek's popularity has spurred investors to question bets that AI demand-driven growth will keep fueling gains for stocks.  Investors started to flock to assets seen as safe as stocks plunged.  The 10-year Treasury yield fell as much as 12 basis points to 4.50%, the lowest level in over a month.