U.S. stocks ended mostly lower on Monday, triggered by a tech bloodbath, amid fears of an artificial intelligence bubble bursting following the debut of a low-cost Chinese AI model, DeepSeek. However, the Dow managed to end in positive territory.
The Dow Jones Industrial Average (DJI) rose 0.7% or 289.33 points, to close at 44,713.58.
The S&P 500 declined 1.5% or 88.96 points, to end at 6,012.28 points, to register its largest single-day percentage decline since Jan. 10. Technology, utilities and industrial stocks were the worst performers.
The Technology Select Sector SPDR (XLK) tumbled 4.9%, while the Utilities Select Sector SPDR (XLU) lost 2.3%. The Industrials Select Sector SPDR (XLI) declined 1.3%. Four of the 11 sectors of the benchmark index ended in negative territory.
The tech-heavy Nasdaq plummeted 3.1% or 612.47 points to finish at 19,341.83 points, recording its largest single-day point and percentage loss since Dec. 18.
The fear-gauge CBOE Volatility Index (VIX) was up 20.54% to 17.90. Advancers outnumbered decliners on the NYSE by a 1.1-to-1 ratio. On the Nasdaq, a 1.44-to-1 ratio favored declining issues. A total of 17.39 billion shares were traded on Monday, higher than the last 20-session average of 14.90 billion.
Tech stocks bled on Monday, with the Nasdaq recording its biggest single-day decline in terms of both points and percentage since Dec. 18 following the debut of a low-cost Chinese AI model developed at a fraction of the cost being spent in Silicon Valley.
Last week, Chinese startup, DeepSeek, rolled out R1, an open-source free assistant, which the company claims uses cheaper chips and less data. It also outperformed multiple OpenAI tests and over the weekend overtook its U.S. rival ChatGPT in downloads from Apple, Inc.’s (AAPL) App Store.
DeepSeek’s biggest claim so far has been that the model cost less than $6 million to design, casting doubt on investor expectations that AI will fuel demand across the supply chain, from chipmakers to data centers.
Although Silicon Valley doubts that, DeepSeek’s claims rattled Wall Street, with tech stocks, led by chipmakers taking a massive hit.
The bloodbath saw AI darling NVIDIA Corporation (NVDA) taking a massive blow. The semiconductor giant saw nearly $600 billion being wiped off in market value, as its shares plummeted 17%.
Other chipmakers also were not spared, with Broadcom, Inc. (AVGO) losing 17.4%, while Microsoft Corporation (MSFT) lost 2.1%. Broadcom has a Zacks Rank #1 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
