
Chinese AI start-up tumbles AI poster child and stocks across the globe – US Market Wrap
Wall Street had a bad start to the week, with concerns that a low-cost artificial intelligence model from Chinese startup DeepSeek would make valuations of the technology that has driven the bull market difficult to explain.
Stocks fell from New York to London and Tokyo. While the decline followed a wild climb to all-time highs, Monday’s rout was precipitated by the emergence of DeepSeek’s latest AI model to the top of the Apple appstore. The S&P 500 plummeted 1.5%, while the Nasdaq 100 fell 3%. A carefully regarded index of chipmakers has dropped the most since March 2020. Nvidia, the poster child for the AI frenzy, fell 17%, marking the worst market-cap drop for a single stock in market history.
In the race for safety, defensive industries such as consumer staples and health care were bid upon. Treasuries rallied, lowering rates to their lowest level this year. Haven currencies, such as the yen and the Swiss franc, rose. Meanwhile, the cryptocurrency market came under pressure.
Monday’s plunge shattered a market narrative that had prevailed since Donald Trump’s re-election in November: America-first, tech-fueled hyper-bullishness that saw a clear upward path for risky assets propelled by deregulation, tax cuts, and even government sponsorship of AI investment. Treasury yields fell dramatically as haven-seeking investors put aside – for the time being – concerns that the incoming president’s policies would stoke inflation.