New York: US stock futures steadied, the dollar edged higher, and tech stocks in Asia slid Tuesday after a sell-off sparked by advances from a Chinese AI startup raised concerns over US dominance in one of the market’s hottest sectors.
Chipmaker Nvidia suffered a historic 17 per cent plunge Monday, erasing $593 billion in market capitalisation—the largest single-day loss in market history.
“We are witnessing the start of a significant re-evaluation of a narrative that has dominated the market for nearly two years,” said Brent Donnelly, president of trading and analytics firm Spectra Markets.
In after-hours trading, Nvidia shares showed slight gains. Nasdaq 100 futures rose 0.1%, while S&P 500 futures were broadly flat.
Ripple effects across markets
In Japan, Nvidia supplier Advantest dropped 10% Tuesday, compounding a weekly decline of nearly 19%. AI investor SoftBank Group fell 5.5%, and data-centre cable maker Furukawa Electric slid 8%. Both companies suffered steep losses Monday, with SoftBank down 13% and Furukawa off 20% over two days.
Australian data-centre landlords also tumbled, while major tech markets in Taiwan and South Korea remained closed for holidays.
Nvidia’s sell-off drove a 3% drop in the Nasdaq Monday. The losses rippled from Tokyo to New York, hitting companies across the AI supply chain, including cable makers, data centres, utilities, and software firms.
Wall Street’s CBOE Volatility Index, a measure of market fear, surged. Safe-haven assets such as US Treasuries, the yen, and the Swiss franc rallied. Ten-year US Treasury yields fell 9.5 basis points to 4.55% in Asia. Fed fund futures indicated an additional 9 basis points of easing by year-end.
Oil prices slid 2% on concerns about energy demand, while gold dropped more than 1% as investors sold bullion to cover losses.
DeepSeek challenges US AI dominance
The market upheaval came as DeepSeek, a Hangzhou-based startup, unveiled a free AI assistant developed with low-cost chips and minimal data.
“The concern is that DeepSeek has delivered high-performing models on a shoestring budget,” said Josh Meyers, a JP Morgan sector specialist. “This raises questions about the necessity of multi-billion-dollar investments in AI when DeepSeek’s models can run on devices like an iPhone.”
Broader market reaction
On Wall Street, the S&P 500 dropped 1.5%, while chipmaker Broadcom fell 17.4%. The Philadelphia Semiconductor Index posted its steepest drop since March 2020, sliding 9.2%.
Tech giants also took a hit. Alphabet declined 4.2%, and Microsoft lost 2.1%, though both steadied in after-hours trading.
In Europe, the STOXX 600 technology index dropped more than 3%, while ASML, a chip manufacturing equipment maker, fell 7%.
Bitcoin, often a barometer for market risk appetite, dipped below $100,000 before recovering to $101,700.
The dollar slipped nearly 1% against the yen and 0.4% against the Swiss franc overnight but edged higher early Tuesday, trading at 155.36 yen and holding the euro at $1.0454.
Markets in China were closed for Lunar New Year celebrations, while Hong Kong trading closed at noon. Both the US Federal Reserve and European Central Bank are scheduled to set interest rates later this week.
PNN
