Futures point to higher Wall Street open, Nvidia rises in pre-market trading
US stock market futures point to a higher open on Wall Street later, with Nvidia – battered yesterday by China’s AI push – rising by 5% in pre-market trading, while other technology stocks have also bounced back.
The popularity of China’s DeepSeek’s new AI app led to a rout in US markets yesterday. AI chip leader Nvidia plunged by 17%, wiping nearly $600bn off the company’s market value, the biggest daily loss for any company. The shares are 5.1% higher in pre-market trading, while other AI-linked stocks have also recovered some ground, with Oracle up 3.3% (down nearly 14% yesterday) and Broadcom rising 4.1%, after losing 17.4% yesterday.
The Nasdaq is expected to open about 0.6% higher while the broader S&P 500 is set to rise by 0.3% at the open.
The “Magnificent 7” members Microsoft, Facebook parent Meta, Apple and Tesla are all due to report corporate results in the next couple of days.
Joshua Mahony, chief market analyst at Scope Markets, said:
Looking ahead, all eyes will remain firmly planted on the US tech names, following a session that saw Nvidia lose a record $589bn of its market capitalisation. That decline also pushed Nvidia into the third spot behind Apple and Microsoft after just four days of being heralded as the world’s most valuable company.
The timing of this week’s news will not be lost on many in the markets, with four of the Mag7 names reporting over the course of Wednesday and Thursday. Undoubtedly, we will see many adjust their statements to shed light on how new developments could drastically reduce capital expenditure going forward. However, it is important to weigh up the possibility that Nvidia chips remain a key component of the DeepSeek repertoire, and thus the idea that all development can be done on a shoestring budget remains unproven for the time being.
Key events
Here’s a bit more info on DeepSeek.
The company was founded by the entrepreneur Liang Wenfeng, who runs a hedge fund, High-Flyer Capital, that uses AI to identify patterns in stock prices. Liang reportedly started buying Nvidia chips in 2021 to develop AI models as a hobby, bankrolled by his hedge fund. In 2023, he founded DeepSeek, which is based in the eastern Chinese city of Hangzhou.
The company is purely focused on research rather than commercial products – the DeepSeek assistant and underlying code can be downloaded for free, while DeepSeek’s models are also cheaper to operate than OpenAI’s o1.
In an interview with Chinese media, Liang said “AI should be affordable and accessible to everyone”. Liang also said that the gap between US and Chinese AI was only one to two years.
The DeepSeek development raises doubts over the necessity for hefty investment in AI infrastructure such as chips and the market-leading role of US tech companies in AI, which in turn threatens to put American tech sector valuations under pressure.
DeepSeek claims R1 cost $5.6m to develop, compared with much higher estimates for western-developed models, although experts have cautioned that may be an underestimate. Last year Dario Amodei, the co-founder of leading AI firm Anthropic, put the current cost of training advanced models at between $100m and $1bn.
Analysts at US investment bank Goldman Sachs raised the alarm over AI spending last year by publishing a note in June with the title “Gen AI: too much spend, too little benefit?”
It asked if a $1tn investment in AI over the next few years will “ever pay off”, voicing concerns about a return on spending that may have been crystalised by DeepSeek.
Turning to the FTSE 100 index in London, Joshua Mahony at Scope Markets said:
The FTSE 100 continues to sail through choppy water with relative ease, as European traders enjoy a brief period of outperformance built around the general lack of big tech companies this side of the Atlantic. The questions that have emerged around a handful of huge AI-focused US tech companies provide the basis for a massive value recalibration if the DeepSeek news can be taken at face value. However, the FTSE 100 instead finds itself on the rise, with the pessimism over lost earnings for the likes of Nvidia instead standing to benefit global businesses where the financial barrier to entry for those seeking to use AI is lower. Chinese stocks continue to rise as people seek the weigh up the validity of the valuation disparity compared with US in a world where AI isn’t just a US-centric affair.
Energy markets are attempting to claw back losses after yesterday’s slump, as markets continue to weigh up the potential implications of a world under Trump. The prospect of a prolonged halt to the conflict between Isreal and Hamas opens the door to a return to the key shipping route through the Red Sea, driving down transit times as ships avoid the lengthy route around the Cape of Good Hope. Nonetheless, risks remain over the potential breakdown in relations between the US and Canada, as Trump’s irritation over the trade deficit between the two countries ignores the fact that without energy they would actually have a surplus. Therefore, Trump’s desire to utilise tariffs in a bid to pressurise the Canadians could instead damage their supply of oil & gas, which could prove inflationary.
Futures point to higher Wall Street open, Nvidia rises in pre-market trading
US stock market futures point to a higher open on Wall Street later, with Nvidia – battered yesterday by China’s AI push – rising by 5% in pre-market trading, while other technology stocks have also bounced back.
The popularity of China’s DeepSeek’s new AI app led to a rout in US markets yesterday. AI chip leader Nvidia plunged by 17%, wiping nearly $600bn off the company’s market value, the biggest daily loss for any company. The shares are 5.1% higher in pre-market trading, while other AI-linked stocks have also recovered some ground, with Oracle up 3.3% (down nearly 14% yesterday) and Broadcom rising 4.1%, after losing 17.4% yesterday.
The Nasdaq is expected to open about 0.6% higher while the broader S&P 500 is set to rise by 0.3% at the open.
The “Magnificent 7” members Microsoft, Facebook parent Meta, Apple and Tesla are all due to report corporate results in the next couple of days.
Joshua Mahony, chief market analyst at Scope Markets, said:
Looking ahead, all eyes will remain firmly planted on the US tech names, following a session that saw Nvidia lose a record $589bn of its market capitalisation. That decline also pushed Nvidia into the third spot behind Apple and Microsoft after just four days of being heralded as the world’s most valuable company.
The timing of this week’s news will not be lost on many in the markets, with four of the Mag7 names reporting over the course of Wednesday and Thursday. Undoubtedly, we will see many adjust their statements to shed light on how new developments could drastically reduce capital expenditure going forward. However, it is important to weigh up the possibility that Nvidia chips remain a key component of the DeepSeek repertoire, and thus the idea that all development can be done on a shoestring budget remains unproven for the time being.
Halfords shares jump 20% on higher profit outlook
Halfords shares jumped as much as 20% after the UK bike and car products retailer reported robust holiday sales and upgraded its profit outlook.
Halfords said Christmas gifting contributed to 13.1% like-for-like sales growth in its cycling division in December, while colder weather in recent weeks had helped its motoring products with like-for-like sales growth of 5.5% in January.
The 133-year-old retailer said:
In recent months we have seen an improvement in trading alongside continued progress on a number of key initiatives, including our pricing and promotion strategies and cost reduction measures.
Halfords said it is on track to exceed its target of £30m in annual cost savings, and as a result expects to make an underlying pre-tax profit of £32-37m for the year to the end of March. Analysts, on average, are expecting a profit of £28.3m.
However, the company, whose stores sell bicycles, accessories and car parts, and which also has garages, mobile vans and home delivery services, warned that changes to Britain’s minimum wage and national insurance contributions would add direct labour costs of £23m for the year to March 2026.
It said:
While the impact of changes to the minimum wage and national insurance contributions are relatively easy to quantify … their effects on the demand environment and health of the broader economy are harder to predict.
Halfords was founded as a wholesale ironmonger by Frederick Rushbrooke in Birmingham in 1892 (the company takes its name from Halford Street, where Rushbrooke opened a store in 1902 and started selling cycling goods)
House sales in London are at the highest level since the Brexit vote dented buyer confidence, as the property market in the capital bounces back from almost a decade of setbacks, according to Foxtons.
The London-focused estate agency said it was handling the highest number of homes under offer since before the Brexit vote in 2016, as it reported that revenues and profits for 2024 beat market expectations.
Guy Gittins, who started his career at Foxtons in 2002 and returned as chief executive three years ago, said the London house sales market had been “riding high” until the Brexit vote, which hit consumer confidence.
“Once the Brexit vote was announced the number of sales each year, certainly focused on London, started to diminish,” he said.
He said a string of events since then have continued to keep London sales at lower levels, including changes of government, the pandemic and Liz Truss’s mini-budget which fuelled a rise in mortgage rates, affecting buyer affordability.
The sales market has had a very tough time of it since the Brexit vote. 2023 was almost a record low level and last year was still historically quite low.
First-quarter 2025 revenue growth in sales … reflects strong under-offer activity in the fourth quarter.
Amazon is seeking permission to launch drones from its warehouse in Darlington, County Durham, in the latest step towards using the devices to deliver packages to homes.
The technology company is to hold a public meeting with local people next week as it seeks permission from the Civil Aviation Authority (CAA) to use the airspace around its warehouse on the edge of the town, in the north-east of England.
Amazon plans to hire a team to launch same-day drone deliveries, under a service called Prime Air, once it has secured approval from the local council to take off and land at the site.
Customers within 7.5 miles of the warehouse, excluding certain areas not suitable for drones, will be able to opt to use the service or more traditional delivery methods once it launches.
Donald Trump has suggested that Microsoft is in talks to acquire TikTok and that he would like to see a bidding war over the app.
When asked if Microsoft was in talks to buy the app, the US president said “I would say yes”, adding “A lot of interest in TikTok. There’s great interest in TikTok.”
Microsoft, TikTok and ByteDance did not immediately respond to Reuters’ requests for a comment outside regular business hours, after the US president’s comments to reporters aboard Air Force One on Monday.
The reported talks mark the second time that Microsoft has been in the frame to acquire TikTok. During his first term, Trump ordered TikTok to separate its US version from ByteDance citing national security concerns.
Microsoft emerged as a top bidder in 2020, but the talks soon collapsed, and Trump’s divestment push ended a few months later when he left office.
TikTok, which has about 170 million American users, was briefly taken offline this month, just before a law requiring its Chinese owner ByteDance to either sell it on national security grounds or face a ban that was to take effect on 19 January.
Average private rents in Great Britain have fallen for the first time since before the pandemic, with an improvement in the supply of properties helping to cool a “ferociously hot” rental market.
After several years of seemingly relentless rises, with fresh records being hit every three months, the typical advertised rent outside London slipped back in the final three months of 2024 to £1,341 a month – the first decline since 2019.
The figures from the property website Rightmove represent a sliver of good news for tenants, many of whom have had to grapple with sizeable increases to their housing costs during the cost of living crisis.
The new average monthly figure, outside London, equates to a drop of £3 compared with the previous quarter, and typical rents are 4.7% higher than a year earlier. Nevertheless, Rightmove claimed this fall was “a key milestone” after a succession of inflation-busting increases, with annual rent growth peaking at 12% in 2022.
Here’s a handy explainer on DeepSeek.
Investors have been dumping US artificial intelligence stocks amid surprise at a new, cheaper but still effective alternative Chinese technology, although some stocks recovered today in European trading.
Smiths Group at bottom of FTSE 100 after reporting cyber attack
Smiths Group is at the bottom of the FTSE 100 index after the UK engineering firm said it had been hit by a cyber attack.
The shares fell by as much as 2.3% and are now down by 1.4%, as Smiths said it was managing a cyber security incident that involved unauthorised access to its systems.
The company, known for making baggage-screening kits and explosive detectors, said it had isolated the affected systems as soon as it became aware of the attack. It said:
Smiths is working with cyber security experts to recover affected systems and determine any wider impact on the business.
We tried out DeepSeek. It worked well, until we asked it about Tiananmen Square and Taiwan
Despite its popularity with international users, DeepSeek’s AI app appears to censor answers to sensitive questions about China and its government.
Chinese generative AI must not contain content that violates the country’s “core socialist values”, according to a technical document published by the national cybersecurity standards committee. That includes content that “incites to subvert state power and overthrow the socialist system”, or “endangers national security and interests and damages the national image”.
Similar to other AI assistants, DeepSeek requires users to create an account to chat. Its interface is intuitive and it provides answers instantaneously, except for occasional outages, which it attributes to high traffic.
We asked DeepSeek’s AI questions about topics historically censored by the great firewall. Here’s how its responses compared to the free versions of ChatGPT and Google’s Gemini chatbot.
Global technology sell-off fades
Technology stocks are recovering after the rout of the last couple of days.
Shares of US chipmaker Nvidia, the poster child of the AI boom in recent years, are up by nearly 6% in Frankfurt, after plunging by 17% on Wall Street yesterday.
Oracle shares rose by 3.4% and AI data analytics firm Palantir gained nearly 3%. The Dutch maker of chipmaking equipment, ASML, edged up by 0.46% following yesterday’s 7% decline.
OpenAI’s chief executive Sam Altman, who runs the AI firm behind ChatGPT, said in a social media post yesterday:
We will obviously deliver much better models and also it’s legit invigorating to have a new competitor.
Darren Nathan at Hargreaves Lansdown is cautiously optimistic about the outlook for western AI firms:
It’s going to take a while for the dust to settle here but it’s by no means the end of the party for AI infrastructure. Many of the recent big cheques set aside for investment in the space look to have been signed off after DeepSeek hit the scene. These include the Stargate proposal, the Bank of China’s 5-year AI investment plan and Meta’s capex plans of up to $65bn for 2025.
Steep reductions in development costs in the early years of technology shifts have been commonplace in economic history. A paradox first noted by the economist William Jevons in 1865 after observing a spike in coal consumption after the introduction of the more efficient Watt steam engine. A fall in cost can actually lead to a larger addressable market. So future demand for computing power could outstrip current expectations.
That bodes well for the likes of Nvidia, meaning that the current weakness could favour those brave enough to see through the market noise and buckle up for the longer term. Eyes will be firmly fixed on earnings tomorrow with three of the magnificent seven, Meta, Microsoft and Tesla set to report. Today it’s industrials that are in the spotlight with numbers due from General Motors and troubled aeroplane maker Boeing. Economic data points to look out for include US Consumer Confidence and House Prices which will give rate setters at the Fed further clues to heat levels in the economy as their first meeting since Donald Trump came to power kicks off today. For now, markets are pricing in next to no chance of a rate cut tomorrow.
European stock markets edge higher
European stock markets have opened cautiously higher.
The FTSE 100 index has opened 0.26% higher at 8,525, up 22 points after ending flat on Monday. The pan-European Stoxx 600 index also rose by 0.2%.
Germany’s was up 0.4% in early trading and Italy’s FTSE MiB gained 0.1%, while France’s CAC edged 0.1% lower and Spain’s Ibex slipped by 0.2%.
Derren Nathan, head of equity research at Hargreaves Lansdown, said the FTSE 100 held
its head above water yesterday amidst a sea of red for tech stocks around the world. Defensive sectors had the best of it including non-cyclical consumer stocks such as Unilever and British American Tobacco, as well as the bigger pharmaceutical names. The same sectors were also in the green across the Atlantic, meaning those portfolios with broader exposure are likely to have smoothed out the market’s most recent gyrations.
Companies in the semiconductor industry have borne the brunt of the sell-off as the emergence of a new AI model from Chinese startup DeepSeek, reportedly developed on a shoestring budget of under $6m, raised concerns about the outlook for spending on cloud infrastructure. The authenticity of this figure has been widely contested.
Nonetheless, Wall Street’s darling Nvidia has lost its briefly held crown as the world’s most valuable company, diving 17% and losing $600bn of market value along the way, the biggest ever loss for a stock in a single day. Other big semiconductor names caught in the crossfire include custom chip designer Broadcom and memory specialist Micron. Outside of the US, stocks that have taken a hit range from Taiwan Semiconductor Manufacturing Company through to the Dutch builder of chip printing machines ASML.
But that only tells one side of the story. For those looking to integrate AI into their business models the prospect of lower development costs could seriously boost returns on investment. Salesforce CEO Mac Benioff’s comments on social media that: ‘data is the new gold’ helped propel the shares up by 4%. And within the ‘Magnificent Seven’, Apple, Meta and Amazon were all in the green.
The DeepSeek AI assistant topped the Apple app store in the US and UK over the weekend, above OpenAI’s ChatGPT.
The Chinese start-up was hit with a cyber-attack yesterday, forcing it to temporarily limit registrations. On its status page, DeepSeek said it started to investigate the issue late Monday night Beijing time. After about two hours of monitoring, the company said it was the victim of a “large-scale malicious attack”. While DeekSeek limited registrations, existing users were still able to log on as usual.
DeepSeek claims to have used fewer chips than its rivals to develop its models, making them cheaper to produce and raising questions over a multibillion-dollar AI spending spree by US companies that has boosted markets in recent years.
Rowan Cheung, founder of an AI newsletter, said:
NEWS: DeepSeek just dropped ANOTHER open-source AI model, Janus-Pro-7B.
It’s multimodal (can generate images) and beats OpenAI’s DALL-E 3 and Stable Diffusion across GenEval and DPG-Bench benchmarks.
This comes on top of all the R1 hype. The 🐋 is cookin’ pic.twitter.com/yCmDQoke0f
— Rowan Cheung (@rowancheung) January 27, 2025
AI reporter Karen Hao posted this thread:
As someone who has reported on AI for 7 years and covered China tech as well, I think the biggest lesson to be drawn from DeepSeek is the huge cracks it illustrates with the current dominant paradigm of AI development. A long thread. 1/
— Karen Hao (@_KarenHao) January 27, 2025
Global tech sell-off carries on; Trump says DeepSeek should be ‘wake-up call’ for US
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Donald Trump has said that DeepSeek should be a “wake-up call” for American AI firms, after US markets got hammered amid concerns that the Chinese startup could challenge the dominance of US AI leaders.
The new US president said in Florida:
The release of DeepSeek, AI from a Chinese company should be a wakeup call for our industries that we need to be laser-focused on competing to win.
He pointed to DeepSeek’s ability to use fewer computing resources.
I view that as a positive, as an asset… you won’t be spending as much, and you’ll get the same result, hopefully.
OpenAI chief executive Sam Altman praised DeepSeek’s launch, saying that it was “invigorating to have a new competitor”.
The popularity of the just-launched Chinese version of OpenAI’s ChatGPT, a free AI app, which the company says it built with cheaper and less advanced chips, sparked a trillion dollar sell-off in US stock markets. One investor called it a “Sputnik moment” for the world’s AI superpowers. The rout hit everything linked to the AI supply chain, from chip and cable makers to data centres and software firms.
On Wall Street, Nvidia, a leading maker of computer chips that power AI models, slumped by nearly 17% and erased almost $593bn in market cap by itself, the biggest single loss of all times. It accounted for most of the 3% drop on the tech-heavy Nasdaq.
Other tech stocks also plunged including AMD, down 6.4%, Intel, down 2.6%, and the Dutch maker of chip manufacturing equipment ASML, down 7%. An index of US semiconductor stocks slid by 9.2% in its biggest single-day percentage fall since March 2020.
The sell-off carried on in Asia, where Japan’s Nikkei lost a further 1.4%, led by chip-related stocks. (Shares are also pressured as interest rates go up in Japan.) The rest of Asia was quiet as China, Taiwan and South Korea were closed for the Lunar New Year and Hong Kong shut early ahead of the break. The Hang Seng edged up 0.1%.
Japanese chip-testing equipment maker Advantest, one of Nvidia’s suppliers, dropped by 11% while chip-making equipment maker Tokyo Electron lost 5.7% and technology start-up investor SoftBank slid by 5.2%.
The Japanese yen, considered as a safe haven, continued to rise against the dollar, up nearly 1% to its strongest level since mid-December. This hurts shares of exporters, though. US stock futures are steady after the rout, pointing to a slightly higher open on Nasdaq later today and a slightly lower open for the broader S&P 500. The dollar has bounced back by 0.5% against a basket of major currencies.
Ipek Ozkardeskaya, senior analyst at Swissquote Bank, believes that yesterday’s AI sell-off was overdone. She argues:
There are reports praising DeepSeek’s performance, some experts say it’s impressive, others say it’s disruptive, and Nvidia itself said that the company came up with something ‘excellent’ – using a lot of its less advanced chips. But beyond the fact that the company used less advanced and cheaper Nvidia chips to build its model, there are a lot of unanswered questions about DeepSeek, including whether its model could be integrated and used by other applications and whether the company really built a model for less than $6m whereas the price mark of the US AI models reaches several hundred million dollars. And last but not least, DeepSeek looks like it made something that already existed for a cheaper price. But it did not come up with an end product that did not exist.
But if DeepSeek successfully does what it says it does – bring equal performance AI models for a cheaper price – it will clearly help the Chinese local players, and all-sized companies around the world that have limited budgets to integrate AI models into their daily lives. The latter will increase the demand for less advanced chips than Nvidia’s best performers, but it will increase demand for chips, still. In this context, we were already pointing at a growing window of opportunity for alternative chip makers – like AMD – in the process of wider adoption of AI models with cheaper chips. We now have a stronger conviction in this view. As such, yesterday’s selloff could move capital around and benefit to the makers of cheaper chips that could appeal to a larger client base than the US Big Tech.
The Agenda
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10am GMT: UK 10-year index-linked Treasury gilt auction
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1.30pm GMT: US Durable goods orders for December
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2pm GMT: US house prices for November
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3pm GMT: US Conference Board consumer confidence for January
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5pm GMT: European Central Bank president Lagarde speaks
