Nasdaq 100: Nvidia and Microsoft Lead Tech Sell-Off After DeepSeek’s Breakthrough

Nasdaq Futures Drop 3% as DeepSeek AI News Sparks Tech Sell-Off

U.S. stock futures plunged on Monday, led by a 3.5% slide in Nasdaq 100 futures, as Chinese startup DeepSeek disrupted the artificial intelligence (AI) narrative. The company’s low-cost, open-source AI model raised doubts about the sustainability of massive AI investments, prompting a tech-heavy sell-off. S&P 500 and Dow Jones Industrial Average futures also declined by 2% and 0.7%, respectively.

DeepSeek claimed its model, developed for under $6 million, outperformed OpenAI’s latest in several tests. This development has shaken investor confidence in the billions spent by U.S. tech giants to dominate the AI race.

How Did Nvidia React to the News?

Nvidia, a key beneficiary of the AI boom, saw its shares plunge 12% in premarket trading, marking its worst single-day drop since March 2020. As the leading producer of GPUs used for training advanced AI models, Nvidia’s valuation is closely tied to expectations of robust AI spending. DeepSeek’s low-cost model raised concerns that demand for Nvidia’s high-end chips could be at risk.

Which Other Tech Stocks Took a Hit?

Microsoft and Palantir dropped 6% each, while Amazon slid 4%. Meta Platforms also declined 3%. Semiconductor stocks were not spared, with Broadcom tumbling 12% and AMD falling 4%. The sell-off reflected widespread anxiety that DeepSeek’s efficiency could signal a shift in the economics of AI investment.

What About AI Infrastructure Plays?

Power providers tied to AI infrastructure were also hit hard. Constellation Energy and Vistra both sank over 11% on fears that reduced spending on AI data centers could lead to lower demand for energy. Data center-focused companies, including Vertiv Holdings, saw double-digit losses as well.

Global Markets Feel the Shockwave

The impact extended beyond U.S. markets. European chipmakers ASML and ASM International dropped 7% and 11%, respectively, while Japan’s Advantest and Tokyo Electron also posted significant losses. DeepSeek’s efficient AI model has sparked global concerns about the competitiveness of existing AI leaders.

What’s Ahead for Traders This Week?

The tech sell-off adds to an already crucial week for markets. Key earnings reports from Microsoft, Meta, Apple, and Tesla will reveal whether Big Tech can justify its enormous AI investments. The Federal Reserve’s policy decision on Wednesday, widely expected to leave interest rates unchanged, will also shape market sentiment.

Traders should watch how AI-related spending forecasts evolve, particularly as new developments like DeepSeek’s model challenge current industry norms. This week’s earnings calls and Fed commentary will likely determine whether the market regains its footing or faces further downside pressure.

More Information in our Economic Calendar.