NASDAQ Plunders Nearly 3%
January 27,2025 12:15 pm EST
Stocks dropped on Monday on concern about an artificial intelligence stock bubble popping because of the emergence of Chinese startup DeepSeek, which has possibly made a competitive AI model for a fraction of the cost.
The Dow Jones Industrials forged ahead 15.15 points to reach midday Monday at 44,439.40, as gains in Apple, Johnson & Johnson and Travelers mitigated the average's decline.
The much-broader index sagged 106.27 points to 5,994.
The NASDAQ Composite swooned 586.36 points, or 2.9%, to 19,367.94.
Last week, DeepSeek released R1, an open-source reasoning model that reportedly outperformed OpenAI's in several tests, and has climbed the charts at app stores. DeepSeek said the initial version of its large language model, launched in late December, cost less than $6 million to design. While Wall Street questions that figure, the startup's claims are nonetheless raising concern that big AI models could be built out with much less investment.
AI darling Nvidia dropped 17%, Broadcom lost 16%, and AMD shed 6%. Microsoft lost 4%. Palantir was hit for 7%. Other megacap tech names Amazon dropped 1%, and Meta Platforms, which shed 2%.
Derivative plays from the AI buildout such as power providers were also hit big. Constellation Energy lost 19%, while Vistra dropped 27%.
On top of that, the Federal Reserve will hold its first policy meeting of the year, deciding on the level of interest rates Wednesday. Fed funds futures are pricing in a more than 99% chance that the central bank leaves interest rates unchanged.
Prices for the 10-year Treasury gained ground, lowering yields to 4.54% from Friday's 4.62%. Treasury prices and yields move in opposite directions.
Oil prices dropped $1.97 to $72.69 U.S. a barrel.
Prices for gold fell $42.10 an ounce to $2,736.80 U.S.
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