U.S. Tech Stocks Drop as Nvidia Leads Amid Chinese AI Rise: Major U.S. tech stocks declined on Friday, led by Nvidia,
after the company’s CEO’s remarks about the emerging Chinese company Deep Seek sparked investor interest.
He emphasized that the company enhances the AI market rather than threatens it.
U.S. Tech Stocks Drop as Nvidia Leads Amid Chinese AI Rise
Major U.S. tech stocks faced losses on Friday, with Nvidialeading the decline.
This came after CEO Jensen Huang commented on the Chinese startup Deep Seek,
attracting investor attention. He stated that the company’s innovations
increase demand for AI hardware rather than disrupt the market.
The “Magnificent Seven” ETF (MAGS) dropped 2% to $53.91. Nvidiashares fell 2.45% to $136.67, yet the company maintained its position
as the second-largest company in the world by market value, standing at $3.369 trillion.
In an interview on Thursday, Huang noted that he disagrees with the initial negative
investor reaction to Deep Seek’s rise and believes it will ultimately benefit the AI industry.
Tesla fell 4.4% to $338.81 amid investor concerns over competition in the AI and advanced technology sectors
Trump Urges Musk to Speed Up Reforms to Reduce Government Spending
On Saturday, U.S. President Donald Trump emphasized his desire for Elon Musk,
his billionaire advisor, to take bolder actions in implementing his reform plan to reduce federal government expenses.
In a post on Truth Social, Trump stated: “Elon is doing a great job, but I’d like to see him act even more boldly… Remember, we have a country to save.”
Earlier, Trump appointed Musk as head of the Department of Government Efficiency (DGE),
a newly established entity responsible for reducing public spending across federal agencies.
This initiative has already led to significant layoffs of federal employees recently.
In the latest workforce reduction, the U.S. Department of Defense announced
on Friday that it would cut its civilian workforce by at least 5% starting next week.
Additionally, the Trump administration has begun dismissing more federal employees
who were in probationary status as part of a comprehensive financial reform plan.
In a legal development, a judge on Thursday rejected a lawsuit filed
by federal employee unions seeking to temporarily halt mass layoffs.
This ruling grants the Trump administration and Musk more flexibility to restructure their government plans.
Despite the Department of Government Efficiency’s broad authority,
Musk’s spending cuts initiative has faced intense opposition and legal challenges,
sparking widespread debate over the impact of these policies on jobs and government services.
U.S. Tech Stocks Drop as Nvidia Leads Amid Chinese AI Rise
Zuckerberg: Too Early to Assess DeepSeek’s Impact on Meta and the Tech Industry: Meta Platforms CEO Mark Zuckerberg stated that it is too early to
determine the potential impact of the AI model launched by
the Chinese company DeepSeek on his company and the tech industry.
Zuckerberg: Too Early to Assess DeepSeek’s Impact on Meta and the Tech Industry
Meta Platforms CEO Mark Zuckerberg emphasized that it is premature
to determine the potential effect of the DeepSeek AI model on his company and the broader tech sector.
Zuckerberg confirmed that Metawill not reduce its AI investments shortly,
noting that DeepSeek’s development has proven that creating AI models
can be less expensive and require fewer computing resources than previously thought. In an interview with CNBC,
he added that multiple overlapping trends influence the technological landscape,
making it difficult to form a clear opinion on the implications of these advancements.
These comments coincided with Meta’sannouncement of strong revenue growth.
The company’s Q4 sales rose by 21% year-over-year to reach $48.39 billion,
reflecting its continued market strength despite increasing competition in the AI sector.
German Economy Contracts in Q4 2024 Amid Fears of Technical Recession
The German economy shrank in the fourth quarter of 2024,
declining more than expected as economic pressures continued to mount ahead of the February parliamentary elections.
Preliminary data released by the Federal Statistical Office on Thursday showed that the inflation
and seasonally adjusted GDP fell by 0.2% quarter-on-quarter and year-on-year in Q4,
compared to a slight growth of 0.1% in Q3. According to a Reuters survey, this exceeded expectations,
which had predicted only a 0.1% decline.
This downturn follows a report earlier this month confirming that the German economy
contracted annually for the second consecutive year,
with real GDP falling by 0.2% in 2024 after a 0.3% decline in 2023.
If this contraction continues into Q1 2025, Germany will officially enter a technical recession,
meaning two consecutive quarters of economic decline.
This would increase pressure on policymakers in Europe’s largest economy.
Zuckerberg: Too Early to Assess DeepSeek’s Impact on Meta
Chinese DeepSeek: Is It a New Threat to AI Giants?: The Chinese startup DeepSeek, founded just a year ago,
Thanks to its advanced capabilities, it has managed to grab global attention, particularly from Silicon Valley.
The company has launched an AI model that rivals the world’s best chatbots but at a significantly lower cost,
creating a groundbreaking shift in the competitive landscape of the artificial intelligence sector.
This accomplishment has positioned DeepSeek as a central topic in tech circles.
It introduces a new vision that threatens the dominance of major companies
and pushes the industry to consider cost efficiency as a primary factor for the future.
DeepSeek, founded in 2023 by Liang Wenfeng, the head of the quantitative hedge fund High-Flyer,
focuses on developing open-source AI models.
These models aim to provide advanced technology at reduced costs,
enabling developers and programmers to use these tools to enhance their models.
In January 2024, the company launched its smartphone application,
which quickly gained massive traction and became one
of the most downloaded apps on iPhones in the U.S.
The app stands out for its unique ability to explain the reasoning behind its answers,
giving it a competitive edge over rivals like ChatGPT by OpenAI.
DeepSeek in the Chinese Tech Landscape
DeepSeek competes directly with Chinese tech giants like Alibaba and Baidu,
which invests heavily in AI projects.
However, DeepSeek stands out due to its unique approach of offering open-source AI models.
This strategy has fostered innovation and attracted massive numbers of users quickly, giving it a competitive advantage.
Additionally, the low-cost models developed by DeepSeek have significantly
reduced development expenses for AI developers in China.
This has sparked fierce local market competition and even price wars among companies,
forcing major corporations to reevaluate their strategies.
The Global Impact of DeepSeek’s Model on the Market
The success of DeepSeek has not been confined to China but has extended to create a tangible global impact.
It has compelled leading companies such as OpenAI and Meta To maintain their competitive edge, consider lowering the prices of their services and products.
This shift has raised fundamental questions about the viability of the massive spending undertaken by American tech companies,
which invest substantial budgets in developing AI infrastructure.
DeepSeek’s model has demonstrated that innovation can be achieved at lower costs and with greater efficiency,
presenting a clear challenge to traditional business models that rely on high expenditures.
This success pressures global companies to reconsider their strategies and adapt to DeepSeek’s new competitive landscape.
The sharp decline in NVIDIA’s stock triggered a wave of negative repercussions across broader markets.
Due to the company’s significant weighting in major indices like the S&P 500 and the Nasdaq 100,
these indices fell by 2.3% and 3.6%, respectively, resulting in substantial losses for other technology stocks.
Analysts suggest that DeepSeek’s low-cost strategy has raised serious
questions about the traditional models relied upon by major U.S. tech firms.
While these companies have spent billions developing AI models requiring massive and expensive infrastructure,
DeepSeek has proven that groundbreaking innovation can be achieved with significantly lower costs,
posing a direct challenge to these established models.
Market Reaction and Future Investments
Major tech companies have announced plans to confront the challenge in response to this shift. For example:
Meta announced its intention to increase spending on AI projects by up to 50% this year,
bringing its total investment to approximately $65 billion.
OpenAI, SoftBank, and Oracle launched a joint $100 billion project to build advanced AI data centers and infrastructure.
AI Strikes a Heavy Blow to Wall Street Indices
Wall Street began its week with significant losses, driven by concerns over the low-cost
AI model developed by Chinese startup DeepSeek and its potential impact on valuations of American tech stocks.
These companies, historically key market growth drivers, faced intense pressure due to this groundbreaking innovation.
Globally, markets from New York to London and Tokyo experienced sharp declines:
The semiconductor index recorded a record decline of 9.5%, the largest drop since March 2020.
NVIDIA, the symbol of the AI boom, saw its shares plummet by 17%,
wiping out approximately $560 billion in market value—the largest single-day market loss for any company in U.S. history.
Market Movements: The Flight to Safety
As major tech stocks collapsed, investors sought refuge in safe assets to avoid further losses. Key shifts included:
An increase in demand for commodities and healthcare stocks.
Higher purchases of Treasury bonds are driving yields to their lowest levels this year.
A sharp decline in cryptocurrencies, with Bitcoin dropping by 3.9% to $100,537.
DeepSeek’s Impact on Cryptocurrencies
The success of DeepSeek’s open-source platform has triggered waves of concern in global markets,
particularly in the AI sector.
This success has highlighted the overvaluation of U.S. tech companies
and raised questions about the sustainability of such investments,
negatively impacting investor appetite for high-risk assets, including cryptocurrencies.
Additionally, the widespread market anxiety has dampened the positive effects of any potential regulatory support,
such as the executive order issued by former U.S. President Donald Trump to promote digital assets.
The close relationship between cryptocurrency performance and major tech stocks has intensified the pressure on Bitcoin.
Digital assets have faced significant pressure in the wake of disruptions caused by DeepSeek,
raising concerns about the future of cryptocurrencies, especially following last year’s significant gains.
Bitcoin experienced sharp fluctuations, stabilizing at $101,800 on Tuesday morning
(Singapore time) after a 3% drop in the previous session. Other cryptocurrencies,
such as Ethereum and Solana, faced even steeper losses, impacted by the sharp decline in the Nasdaq 100 index.
DeepSeek’s Impact Extends to Japanese Stocks
The turmoil caused by DeepSeek did not stop at cryptocurrencies but extended to Japanese stock futures.
The Nikkei 225 futures dropped to 39,060 points on the Chicago Exchange,
compared to a closing price of 39,565 points, as the yen rose by 1.5% against the dollar, further pressuring Japanese exporters.
Ryota Otsuka, a strategist at Toyo Securities, remarked: “The Japanese market is expected to start weak,
but it may recover after digesting the impact of DeepSeek and the stronger yen.”
Conclusion
The rise of DeepSeek signifies a pivotal moment in the AI industry,
forcing major tech companies to rethink their investment strategies and technological approaches.
It highlights a new competitive landscape where innovation,
efficiency, and cost-effectiveness dominate.
Far from being just another startup, DeepSeek represents a transformative force reshaping global AI competition.
Chinese DeepSeek: Is It a New Threat to AI Giants?:
