U.S. stock futures steadied on Tuesday, while the dollar edged higher, and Asian tech stocks faced sharp declines. This came after a wave of selling sparked by advancements from a Chinese AI startup, DeepSeek, which challenged U.S. dominance in one of the most dynamic sectors.
Chipmaker Nvidia witnessed a historic 17% plunge overnight, erasing nearly $593 billion in market capitalization—the largest single-day loss ever recorded. “We are in the midst of a critical re-evaluation of a market narrative that has dominated for nearly two years,” said Brent Donnelly, president of Spectra Markets.
Despite the steep drop, Nvidia stock saw modest recovery in after-hours trading, with Nasdaq 100 futures up 0.1% and S&P 500 futures remaining flat.
Asian Tech Stocks Face Heavy Losses
In Japan, Nvidia supplier Advantest dropped 10%, bringing its weekly losses to nearly 19%. AI-backer SoftBank Group slid 5.5%, while data-center cable maker Furukawa Electric fell 8%, adding to significant losses from Monday. SoftBank has fallen 13% this week, and Furukawa is down 20%.
Data center landlords in Australia also saw declines, while tech-heavy markets in Taiwan and South Korea were closed for a holiday.
Global Sell-Off Ripple Effect
Nvidia’s collapse accounted for much of the 3% drop in the Nasdaq on Monday. The sell-off spread globally, impacting companies across the AI supply chain, including chipmakers, data centers, power utilities, and software firms. The Philadelphia Semiconductor Index fell 9.2%, its largest drop since March 2020, while Broadcom shares plummeted 17.4%.
Wall Street’s fear gauge, the CBOE Volatility Index, surged as investors sought safe-haven assets like government bonds, the yen, and the Swiss franc. Ten-year U.S. Treasury yields fell by 9.5 basis points to 4.55%, while oil prices dropped 2% amid energy demand concerns.
DeepSeek AI Sparks Industry Disruption
DeepSeek, a startup from Hangzhou, China, unveiled a free AI assistant developed using lower-cost chips and less data than its U.S. competitors. “The concern is that DeepSeek has delivered performance-topping models with minimal resources, challenging the necessity for multi-billion-dollar investments in computing infrastructure,” noted J.P. Morgan’s Josh Meyers.
This breakthrough raises questions about the long-term viability of capital-heavy operations by U.S. tech giants like OpenAI, Google, and Anthropic.
Broader Risk-Off Sentiment
On Wall Street, the S&P 500 fell 1.5%, with Broadcom dropping 17.4% and the Philadelphia Semiconductor Index experiencing its worst day in over three years. Google parent Alphabet fell 4.2%, and Microsoft declined 2.1%, though both saw stabilization in after-hours trading.
In Europe, the STOXX Europe 600 Technology Index dropped over 3%, while chip equipment maker ASML slid 7%.
Bitcoin, often viewed as a risk sentiment barometer, fell below $100,000 for the first time in a week before stabilizing around $101,700.
Currency and Central Bank Focus
The dollar dipped nearly 1% against the yen and 0.4% against the Swiss franc overnight but recovered slightly on Tuesday, trading at 155.36 yen and holding the euro steady at $1.0454.
Looking ahead, the U.S. Federal Reserve and European Central Bank are set to meet this week to decide on interest rates, with investors closely watching for potential policy shifts amid heightened market volatility.
