Big Tech slump pushes Nasdaq sharply lower amid China’s AI push
The opening bell has rung on Wall Street, and technology stocks have plunged, with the tech-heavv Nasdaq losing 3.5%.
The Nasdaq and the S&P 500 fell to their lowest levels in more than a week, as the popularity of a low-cost Chinese AI model rattled global technology stocks.
The Nasdaq tumbled by more than 700 points to 19,250, as the US chipmaker Nvidia fell by 12.3%, wiping $380bn off the company’s market value and taking it to $3.1trn.
Microsoft, Meta Platforms and Google parent Alphabet lost between 2.2% and 3.6% while AI server makers Dell Technologies and Super Micro Computer slid by 7.2% and 8.9%.
The broader S&P 500 lost 130 points, or 2.1%, at the open while the Dow Jones fell by 260 points, or 0.6%. The S&P 500 information technology sector has lost 4.6%, and is on track for its biggest daily decline since September 2022.
European and Japanese tech stocks have also slumped as the emergence of a Chinese chatbot competitor to OpenAI’s ChatGPT, DeepSeek, raised doubts about the sustainability of the US artificial intelligence boom.
The DeepSeek AI assistant topped the Apple app store in the US and UK over the weekend, above OpenAI’s ChatGPT.
Key events
Russ Mould of stockbroker AJ Bell said:
There is a new AI challenger in town and investors are spooked at what they’ve discovered. China’s DeepSeek last week revealed how to build a large language model on a budget that can learn and improve without human supervision. Its assistant is free to use and runs off lower-cost chips and less data – implying a major challenger to the established AI names in the West.
Investors are slowly digesting the news and portfolio readjustments are causing some of the big tech names to pull back. In Asia, AI investor SoftBank fell 8% on Monday while Tokyo Electron slipped 4.9%. In Europe, ASML crashed by 9%. Futures prices also imply a bad day for the Nasdaq when US markets open later on, with the tech-heavy index indicated to fall 3%. These market movements suggest investors are worried about disruption to what has so far been an easy ride for most stocks linked to the AI theme.
The AI super-race is seeing new challengers emerge and not everyone is going to win. The companies that enjoyed first-mover advantage will now be under pressure to launch something even better or be left behind. It’s natural evolution – when someone launches a product or service that sees strong demand, someone else will always try to come along with something cheaper to undercut the market leaders.
The US government – both under Donald Trump and previously under Joe Biden – have been trying to stop China from accessing Western technology. That strategy might have backfired as it looks to have encouraged China to ramp up efforts to build its own technology and we’re now seeing evidence that the country is making waves.
Nvidia’s $465bn DeepSeek sell-off biggest in market history
The 13% plunge in Nvidia shares, fuelled by investor worries about Chinese artificial-intelligence startup DeepSeek, wiped a record amount of stock market value from the world’s largest company.
Nvidia shares tumbled after the opening bell Monday, erasing about $465bn from the company’s market value. That eclipsed the previous record — a 9% drop in September that wiped out $279bn in value — and was the biggest in US stock market history, according to Bloomberg News.
Russ Mould, chief market analyst at the stockbroker AJ Bell, has helped us work out the earlier decline in the Nasdaq in dollar terms.
According to Refinitiv, the Nasdaq Composite had a market cap of $32.5 trillion as of the close on Friday, and the earlier 3.5% decline wiped $1.1 trillion off the value of the index. It is now down by 2.35%.
News last week that the Chinese startup DeepSeek has built an artificial-intelligence model competitive with Western rivals for a fraction of the cost, and its popularity over the weekend, has sparked a panic in the chips sector.
Nvidia has sold off with the shares now down 13.5%, wiping more than $400bn off its market value.
Big Tech slump pushes Nasdaq sharply lower amid China’s AI push
The opening bell has rung on Wall Street, and technology stocks have plunged, with the tech-heavv Nasdaq losing 3.5%.
The Nasdaq and the S&P 500 fell to their lowest levels in more than a week, as the popularity of a low-cost Chinese AI model rattled global technology stocks.
The Nasdaq tumbled by more than 700 points to 19,250, as the US chipmaker Nvidia fell by 12.3%, wiping $380bn off the company’s market value and taking it to $3.1trn.
Microsoft, Meta Platforms and Google parent Alphabet lost between 2.2% and 3.6% while AI server makers Dell Technologies and Super Micro Computer slid by 7.2% and 8.9%.
The broader S&P 500 lost 130 points, or 2.1%, at the open while the Dow Jones fell by 260 points, or 0.6%. The S&P 500 information technology sector has lost 4.6%, and is on track for its biggest daily decline since September 2022.
European and Japanese tech stocks have also slumped as the emergence of a Chinese chatbot competitor to OpenAI’s ChatGPT, DeepSeek, raised doubts about the sustainability of the US artificial intelligence boom.
The DeepSeek AI assistant topped the Apple app store in the US and UK over the weekend, above OpenAI’s ChatGPT.
Lagarde warns of ‘vicious circle’ if central bank independence is undermined
Central bank independence is being challenged in parts of the world and greater political influence could undermined banks’ ability to keep inflation down, risking economic volatility, according to European Central Bank president Christine Lagarde.
Donald Trump said last week he would demand that the Federal Reserve lower borrowing costs, claiming that he knew interest rates much better than people in charge of making that decision.
While the comment is considered more rhetoric than a plan to curtail the Fed’s independence, politicians have been encroaching on an area that has been off limits to them for decades.
Lagarde told a Hungarian central bank conference:
While recent research suggests that de jure central bank independence has never been more prevalent than it is today, there is no doubt that the de facto independence of central banks is being called into question in several parts of the world.
She warned that political interference could lead to a “vicious circle” that might result in central bank independence being undermined.
Political influence on central bank decisions can also contribute substantially to macroeconomic volatility.
The Fed is expected to keep interest rates on hold on Wednesday while the ECB is likely to cut rates by a quarter point a day after. America’s central bank will argue that inflation is coming down only slowly and that some policy proposals of the Trump administration could increase price pressures.
Lagarde said persistent political pressure on a central bank increases exchange rate volatility, and raises bond yields and the risk premia. This sort of volatility could make it more difficult to keep inflation down, raising concerns that independent central banks are failing to deliver on their mandates, she argued.
Such a sequence of events, she said, could then undermine the social consensus and further amplify volatility in the economy.
She spoke in a video address to Hungary, where prime minister Viktor Orban’s political ally, former finance minister Mihaly Varga, was appointed as the bank’s next governor from March.
Jean Boivin, head of BlackRock Investment Institute, speaking after Lagarde, said independence is not a given.
We haven’t been in a situation where we have to deal with inflation at such a high debt level.
The conflict that’s going to create to me is real.
That independence is not something you just assert, it’s something you need to manage and that management is going to get really tricky now going forward.
Many central banks ramped interest rates up in recent years to combat soaring inflation, limiting government’s ability to spend just as rapid price growth eroded real incomes.
Peter Kazimir, Slovakia’s central bank chief and an ECB policymaker, expects more conflict with governments over this inflation response. Kazimir said in Budapest:
Finance ministers and central bank governors are not in the same boat, this temptation to play the blame game is pretty high, especially when inflation is so high.
We were the best friend of finance ministers with very low rates. But we are not anymore.
Gyorgy Matolcsy, Hungary’s outgoing central bank chief, who clashed with Orban at times, also backed independence.
Sometimes there will be fights, skirmishes, debates, but you have to be adamant for keeping your central bank independent.
On the subject of automation and artificial intelligence:
The automation of millions of jobs will increase inequality in the UK unless the government intervenes to support small businesses and workers through the transition, according to a report into the future of work.
Ministers need to act in the interest of those who will be made unemployed or whose jobs dramatically change, says the report by the Institute for the Future of Work (IFOW) thinktank, in order to prevent skills shortages hitting employers and workers from suffering a decline in job satisfaction and wellbeing.
Artificial intelligence software is expected to become a widespread tool in factories, offices and in the public sector, demanding new skills, the IFOW said. However, a survey of 5,000 UK employees found “a pervasive sense of anxiety, fear and uncertainty” about the introduction of AI technology, and what it could do to their work.
TikTok is back in the US – but Apple and Google are not sure if it should be.
The short video app has yet to appear on the tech companies’ app stores, reflecting an unease about the White House executive order that has given TikTok the confidence to resume operations after temporarily shuttering the service on 18 January. Apple and Google do not appear to agree.
The legislation forbade companies from distributing, maintaining or updating TikTok – for instance, selling it on an app store – after a deadline of 19 January. But the executive order, signed within hours of Donald Trump’s return to the White House, suspended for 75 days enforcement of an act that demanded the Beijing-based owner of TikTok, ByteDance, sell the app’s US operation or face a de facto ban.
The order seeks to reassure companies that work with TikTok that they will not be prosecuted for keeping the social media app on US users’ smartphone screens. It also instructs the attorney general – who leads the Department of Justice (DoJ) – to issue a letter reassuring those entities that the law has not been violated and there is no liability for their conduct.
Bond yields fall, yen and Swiss franc jump in rush for safe-haven assets
Bond yields have fallen, as investors rushed to buy government bonds, considered a safe investment, amid the global sell-off in tech stocks – triggered by the popularity of a new free Chinese artificial intelligence app.
The yield, or interest rate, on Germany’s 10-year bond, the benchmark for the eurozone, fell by 7 basis points to 2.476%, after rising to 2.569% on Friday. Yields move in opposite direction to prices. The Italian bond yield fell by 4 basis points to 3.616%.
In the UK, the 10-year gilt yield dropped by 6 basis points to 4.574%.
The Japanese yen and the Swiss franc jumped against other major currencies in the rush for safe-haven assets. The yen rallied by 1.3% versus the dollar, rising as high as 153.73, its highest level since mid-December. The Swiss franc rose by nearly 1% to $0.8972.
The dollar gave up earlier gains and is now down by 0.3% against a basket of major currencies.
Further plans for US tariffs are also on investors’ minds, ahead of several central bank meetings later this week, including the US Federal Reserve, which is expected to hold interest rates steady on Wednesday, and the European Central Bank on Thursday, which is expected to cut rates by a quarter point.
The United States and Colombia pulled back from the brink of a trade war on Sunday after Colombia agreed to accept military aircraft carrying deported migrants.
Deutsche Bank analyst George Saravelos has looked at China’s AI push and what it means for the world.
The emergence of a new AI technology at much cheaper development cost should be interpreted as a broadly positive supply shock, he said.
The benefits of AI would disseminate to the global economy at faster speed and bigger scale, ultimately allowing for faster productivity gains. From a global macro perspective this translates to higher growth but less inflation, ultimately positive for bond and equity markets at the same time. If technology dissemination is more global and reduces a US-specific technological advantage, the impact should be considered to be a marginal dollar negative.
But what about the short- to medium-term implications?
The clearest analogy that comes to mind is the DotCom unwind of the 2000s. What was the impact?
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A large equity sell-off that spilled over to the real economy and led to a mild recession led by a capital expenditure unwind;
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By extension, a more dovish Fed and a rally in bond markets;
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An initially mixed reaction to the USD on risk-aversion but ultimately a weaker dollar via an unwind of equity inflows and narrowing rate differentials versus the rest of the world.
All of the above need to be considered in the context of a new US administration with a potentially more activist president, where we would add a few additional implications:
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The odds of a more aggressive net fiscal easing would likely go up;
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The odds of a potentially more aggressive containment policy vis-à-vis China would likely go up, in the context of a shrinking technological lead;
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The odds of a more aggressive non-China tariff policy in the context of greater US growth vulnerabilities would go down.
He added:
Taking it all together we would assess the incoming newsflow as ultimately working in a dollar negative direction, even if the initial market reaction has been dollar positive. We are not changing any views for now but we are certainly attentive to the sharpness of US equity moves in the context of what is interpreted as a major technological advancement.
Ryanair hints fares could go up
Jasper Jolly
Ryanair has cut its forecasts for passenger growth, blaming delays in new planes from US manufacturer Boeing, and hinted that fares could go up in the coming year.
The Irish budget airline said it expects to carry 206m passengers during the year to March 2026, down from the 210m previously targeted.
Boeing has been struggling to raise its rate of production of its bestselling 737 Max, a year after a mid-air door panel blow-out focused intense scrutiny on its safety record. Kelly Ortberg was brought in to turn the company around, only to face crippling strikes over pay at its Seattle factories.
Neil Sorahan, Ryanair’s chief financial officer, said that Boeing delays were “the only thing that’s behind the cut in the traffic”. “The ramp-up after the strike wasn’t as fast as we’d have liked,” he said.
However, Sorahan said that Boeing’s management appeared to be doing a better job, and that morale was good on the factory floor on a recent visit to Seattle.
Ryanair’s profits after tax fell by 12% in the first nine months of its 2025 financial year to €1.94bn (£1.6bn). Sorahan said that was caused by the “need to stimulate customers back at the start of the year” with lower fares.
However, Sorahan said the European airline industry would be “capacity-constrained”, which would lead to upward pressure on prices.
We’ve turned a corner on fares. In a capacity-constrained market my gut would say that fares will be up in the coming year.
The delays to Boeing deliveries of new planes are preventing Ryanair from taking full advantage of rising demand for air traffic. Most forecasts for global air travel suggest that flight numbers will increase rapidly in the coming decades, with a consequent increase in carbon emissions in the absence of carbon-neutral fuels such as sustainable aviation fuel.
