NEW YORK (AP) — Wall Street’s superstars tumbled Monday as a rival from China threatens to ramp up the artificial intelligence frenzy that helped them make so much money.
The S&P 500 was down 1.6% in morning trading, heading for its worst day in more than a month. Big Tech stocks took some of the heaviest losses, with NVIDIA down 13%, and dragging the Nasdaq Composite down 2.7%.
Stocks outside AI-related industries held up much better, however, and the Dow Jones industrial average fell just 65 points, or 0.1%, as of 10:27 a.m. eastern time. The Dow has much less emphasis on technology than the S&P 500 and NASDAQ.
The shock to financial markets came from China, where a company called Deepseek said it had developed a major language model that can compete with American giants but at a fraction of the cost. Deepseek’s app had already reached the top of Apple’s App Store chart on Monday morning, and analysts said such a feat would be particularly impressive considering how the US government has restricted Chinese access to top AI chips.
Skepticism remains, however, about how much Deepseek’s announcement will ultimately shake up the AI supply chain, from the chipmakers making semiconductors to the utilities hoping to electrify massive data centers that gobble up computing power.
“It remains to be seen if Deepseek found a way to work around these chip limitations and which chips they ended up using, as there will be a lot of skeptics in this matter considering the information comes from China,” according to Dan Ives, an analyst with Wedbush Securities.
The Deepseek’s disruption nonetheless rocked stock markets worldwide.
In Amsterdam, Dutch chip supplier ASML fell 7.2%. In Tokyo, Japan’s Softbank Group Corp. lost. 8.3% and is almost back to where it was before he jumped on an announcement trumpeted by the White House that it was participating in a partnership to invest up to $500 billion in AI infrastructure.
And on Wall Street, shares of Constellation Energy fell 20.3%. The Company said it would restart the closed Three mile island nuclear power plant to provide power for data centers for Microsoft.
All the concerns sent investors to bonds, which can be safer investments than any stocks. The rush sent the 10-year Treasury yield to 4.54% from 4.62% late Friday.
It’s a sharp turnaround for the AI winners, who had risen in recent years on hopes that all the investment pouring into the industry would lead to a possible remaking of the global economy, along with huge profits along the way.
For example, Nvidia stock had risen from less than $20 to more than $140 in less than two years before Monday’s drop.
Other major tech companies had also joined in the frenzy and their stock prices had also benefited. It was only on Friday that Mark Zuckerberg, CEO of the Meta Platforms, said he expects to invest up to $65 billion this year, while talking about building a massive data center Meta in Louisiana so big it would cover an area which equals a significant portion of Manhattan.
Such companies have become so dominant that they have taken the nickname of the ‘beautiful seven’.
Stock markets abroad saw moves for indexes across Europe and Asia not as strong as for major U.S. tech stocks. France’s CAC 40 fell 0.1% and the DAS -DAX lost 0.4%.
In Asia, shares were 0.1% lower in Shanghai after a Research from manufacturers showed export orders in China falling to a five-month low.
The Federal Reserve will hold its final policy meeting later this week. Traders don’t expect recent weak data to push the Fed to cut its key interest rate. They are almost certain that the central bank will remain stable, according to Data from CME Group.
AP Business Writers Matt Ott Ott and Elaine Kurtenbach contributed.
This story has been corrected. Meta plans to build a data center in Louisiana, not Manhattan.