Market Update – January 27, 2025

Over the past week, financial markets have experienced significant volatility, primarily driven by developments in the artificial intelligence (AI) sector. A notable event was the emergence of China’s DeepSeek, an AI assistant application that has rapidly gained popularity. DeepSeek’s rise has led to a substantial sell-off in major technology stocks, as investors reassess the competitive landscape in AI. ¹

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Impact on Major Technology Stocks

The swift ascent of DeepSeek has raised concerns about the future market share of established U.S. tech companies in the AI domain. This apprehension has resulted in a notable decline in stock prices of key players:

• Nvidia: The company’s shares fell by over 11%, reflecting investor anxiety about potential shifts in AI hardware demand.²  

• Microsoft, Meta, and Tesla: These tech giants also experienced declines in their stock values, contributing to a broader downturn in the technology sector.³

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Market Indices Performance

The broader market mirrored these concerns, with significant movements in major indices:

• Nasdaq 100: Futures dropped nearly 4%, indicating potential for the largest daily decline since September 2022.⁴

• S&P 500: Futures decreased by approximately 2%, signaling widespread market apprehension.⁵ 

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DeepSeek’s Market Disruption

DeepSeek’s AI model distinguishes itself by utilizing less data and operating at a fraction of the cost compared to existing models. This efficiency challenges the substantial investments made by U.S. companies in AI development and has prompted a reevaluation of the industry’s competitive dynamics.⁶ 

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Investor Sentiment and Economic Indicators

The uncertainty introduced by DeepSeek’s emergence has led investors to seek safer assets, resulting in a decline in the U.S. dollar. Additionally, upcoming economic data releases, including GDP and inflation figures, are anticipated to influence market sentiment further. ⁷

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Conclusion

The past week’s market activity underscores the profound impact that advancements in technology, particularly in AI, can have on financial markets. As the situation evolves, it is crucial for investors to stay informed and consider the broader implications of such developments on their investment strategies.

1.  https://www.theaustralian.com.au/business/markets/chinas-deepseek-ai-model-and-us-trade-policy-in-focus-amid-big-week-for-markets/news-story/75e5d6dc540eddf25171eac5eb425023?utm_source= ↩︎
2.  https://markets.businessinsider.com/news/stocks/nvidia-tech-stocks-deepseek-ai-race-nasdaq-2025-1?utm_source= ↩︎
3.  https://www.theguardian.com/business/live/2025/jan/27/gsk-deal-oxford-university-cancer-vaccines-dollar-rises-after-trump-u-turn-colombia-tariffs-business-live?utm_source= ↩︎
4.  https://www.reuters.com/technology/chinas-deepseek-sets-off-ai-market-rout-2025-01-27/?utm_source= ↩︎
5.  https://www.reuters.com/technology/chinas-deepseek-sets-off-ai-market-rout-2025-01-27/?utm_source= ↩︎
6.  https://www.marketwatch.com/story/does-deepseek-spell-doomsday-for-nvidia-and-other-ai-stocks-heres-what-to-know-0c22501e?utm_source= ↩︎
7.  https://www.theaustralian.com.au/business/markets/chinas-deepseek-ai-model-and-us-trade-policy-in-focus-amid-big-week-for-markets/news-story/75e5d6dc540eddf25171eac5eb425023?utm_source= ↩︎