The swings were driven largely by technology and high-momentum sectors, including AI-focused stocks, cryptocurrencies, and other previously strong performers. Analysts noted that uncertainty over whether AI investments will generate promised economic returns and questions about future Federal Reserve interest rate policy continue to unsettle investors.

Tech Stocks Lead the Decline

Nvidia, a bellwether for AI-driven technology, initially rose 5% following strong quarterly earnings and an optimistic revenue forecast. Analysts at UBS, led by Timothy Arcuri, suggested that Nvidia’s robust guidance could support higher stock prices, noting that “the AI infrastructure tide is still rising so fast that all boats will be lifted.”

Despite these gains, Nvidia ultimately fell 3.2%, highlighting the stock’s significant influence on the S&P 500 due to its market capitalization. Other AI-linked companies experienced similar volatility. Palantir Technologies swung from an early gain of 5.5% to a 5.8% loss, while Amazon shares reversed a 2.1% rise to end down 2.5%.

Investors remain cautious about the broader AI sector, questioning whether heavy investment in chips and data centers will translate into meaningful long-term profits. Nvidia forecasts $65 billion in chip sales over the next quarter, but uncertainty persists over the economic impact for companies relying on these technologies.

Cryptocurrency and Market Sentiment

Cryptocurrencies also weighed on the market, with Bitcoin dropping below $87,000, down from nearly $125,000 earlier last month. Companies linked to the crypto sector faced steep declines: Robinhood Markets fell 10.1% and Coinbase Global lost 7.4%.

According to a Bank of America survey of global fund managers, a record proportion of investors believe companies are overinvesting, reflecting a cautious sentiment toward both tech and AI-related sectors.

Interest Rate Uncertainty Remains

The second factor affecting markets is uncertainty around Federal Reserve policy. Thursday’s U.S. jobs report offered a mixed signal: stronger-than-expected hiring in September indicated ongoing economic resilience, but a slight rise in the unemployment rate left open the possibility of future rate adjustments.

Traders currently assign roughly a 40% probability to a Fed rate cut in December, slightly higher than the 30% chance noted the previous day, according to CME Group data. Market expectations for continued rate cuts have supported stock prices earlier in the year, but persistent inflation above the Fed’s 2% target remains a constraint.

Winners and Losers in the Session

Retailer Walmart was among the few winners on Thursday, rallying 6.5% after reporting strong quarterly sales and profits that exceeded analyst expectations. The company continues to benefit from steady consumer spending, even amid broader economic concerns.

However, the gains from Walmart were overshadowed by losses in technology and crypto sectors, which remain highly sensitive to changes in investor sentiment and policy expectations.

The S&P 500 closed at 6,538.76, down 103.40 points, the Dow fell to 45,752.26, and the Nasdaq ended at 22,078.05, down 486.18 points. Meanwhile, the yield on the 10-year Treasury eased to 4.09% from 4.13% late Wednesday, reflecting investor recalibration toward fixed-income markets.

Global Market Reactions

Outside the U.S., markets posted gains as investors responded to regional economic and corporate data. Japan’s Nikkei 225 rose 2.6%, while South Korea’s Kospi increased 1.9%. European markets also saw modest advances, suggesting that global equities remain influenced by regional dynamics and corporate earnings reports.

Source: AP News – Big swings keep rocking Wall Street as US stocks drop sharply after erasing a morning surge

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News from China disrupted U.S. markets on Monday, sending shockwaves through the tech sector and unsettling the frenzy around artificial intelligence (AI).

A Chinese company, DeepSeek, announced the development of a large language model (LLM) capable of competing with U.S. AI giants—at a fraction of the cost. Despite U.S. government restrictions on Chinese access to advanced AI chips, DeepSeek surged to the top of the Apple App Store’s free apps chart, stunning analysts and investors.

The announcement triggered significant declines for tech stocks like Nvidia, Broadcom, and Alphabet (Google’s parent company). Meanwhile, the broader market saw mixed results, with some sectors gaining despite the tech slump.

Let’s break down the numbers to understand DeepSeek’s impact on the financial markets.

Key Stats from Monday’s Market Shake-Up

5.6%

• Decline in the S&P 500 tech sector, marking its worst single-day drop since September 2020.
• Notably, Nvidia was one of eight tech stocks in the sector to post double-digit losses.
• Without Apple’s 3% gain, the index’s decline would have been even sharper.

$590 Billion

• The approximate decline in Nvidia’s market value, equivalent to more than the combined market value of Home Depot and Lowe’s.
• Despite the drop, Nvidia still holds an impressive market cap of approximately $2.9 trillion.

$27.6 Billion

• The amount Oracle CEO Larry Ellison’s net worth fell after the selloff, per the Forbes Real-Time Billionaires list.
• Last week, Ellison’s fortune surged after Donald Trump announced a $500 billion AI infrastructure partnership involving Oracle, OpenAI, and SoftBank.
• Nvidia CEO Jensen Huang also saw his net worth tumble by $20.8 billion, settling at $103.6 billion.

28.3%

• The decline in Vistra Corp.’s stock, the biggest drop for any stock in the S&P 500.
• Vistra, an independent power producer, had soared last year due to expectations that U.S. AI infrastructure would drive significant demand for power.

351 Stocks

• The number of S&P 500 stocks that rose on Monday despite the sharp drop in the index.
• The decline highlights the outsized influence of tech stocks like Nvidia on the overall index.
• The Dow Jones Industrial Average, which has less emphasis on tech, managed to close with a modest gain.

What Does This Mean for Investors?

DeepSeek’s rise has sent a clear message: China is a formidable competitor in AI development, and its advancements can shake the dominance of U.S. tech giants. The volatility in the market underscores the heavy reliance on a few key players in the tech sector, making the broader market vulnerable to disruptions tied to these companies.

While the S&P 500 tech sector suffered, other parts of the market—especially those with less exposure to AI hype—saw gains. Investors should take note of these shifts as the global AI race accelerates.

Key Takeaways

• DeepSeek’s announcement rattled U.S. markets, challenging the dominance of American AI firms.
• Nvidia, Alphabet, and Broadcom saw significant declines, dragging down the S&P 500 tech sector.
• The broader market showed resilience, with more than 350 S&P 500 stocks rising despite the tech selloff.
• DeepSeek’s success, despite U.S. chip restrictions, raises questions about the future of global competition in AI.

Source

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