Nasdaq clobbered, Nvidia sinks 17% while Dow stages comeback as AI fears shake markets

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The Nasdaq tanked on Monday as a Chinese startup rattled faith in US leadership and profitability in AI, taking a hammer to Nvidia (NVDA), wiping out a record $589 billion in market value.

The Nasdaq Composite (^IXIC) sank more than 3%, while the S&P 500 (^GSPC) dropped nearly 1.5%.

The blue-chip Dow Jones Industrial Average (^DJI), which is less dependent on tech stocks gained more than 0.6%, as investors flocked to more defensive sectors. Shares of Apple (AAPL), Meta (META), and software giant Salesforce (CRM) also bucked the tech rout.

The Nasdaq and S&P 500 were rattled by claims by China’s DeepSeek that its AI assistant uses cheaper chips and less data than leading models, but performs equally well. A surge in DeepSeek’s popularity has spurred investors to question bets that AI demand-driven growth will keep fueling gains for stocks.

AI bellwether Nvidia’s shares plunged nearly 17% as chip-related names took a bruising. ASML (ASML) lost over 6%, while Broadcom (AVGO) and Micron Technology (MU) also got hammered.

Shares of Microsoft (MSFT) dropped more than 2% amid worries about megacaps’ hefty investment in AI. Google parent Alphabet (GOOG, GOOGL) and Amazon (AMZN) also lost ground.

Big Tech earnings season kicks off this week, highlighted by results from Apple, Tesla (TSLA), Meta, and Microsoft. Eyes will be on guidance for future profit as DeepSeek raises questions about prospects for revenue.

Investors started to flock to assets seen as safe as stocks plunged. The 10-year Treasury yield (^TNX) fell as much as 12 basis points to 4.50%, the lowest level in over a month, while haven currencies including the yen and the Swiss franc surged.

In the background, trade war concerns revived during a face-off between President Donald Trump and Colombia over the weekend. Trump threatened to impose 25% tariffs on the country’s goods in a row over deported migrants before putting the duties on pause after a deal was reached.

Meanwhile, the Federal Reserve will hold its first policy meeting of 2025 this week, with officials already on watch for quick-fire moves by Trump that could pose challenges to the central bank. The president has called for the Fed to lower interest rates, signaling a coming clash with policymakers, who begin their two-day gathering on Tuesday.

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