Market Meltdown: Nasdaq and S&P 500 Plunge as AI Competition Heats Up

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The U.S. stock market faced a significant downturn today, with the Nasdaq Composite and S&P 500 index experiencing sharp declines amid rising fears over competition from China’s new AI technology.

The Nasdaq index dropped by approximately 3.5%, while the S&P 500 (SP500) tumbled around 2%.

This sell-off was largely fueled by concerns surrounding Nvidia stock ($NVDA), which plummeted by more than 11% in premarket trading.

The catalyst for this market turmoil was the launch of an AI assistant by Chinese startup DeepSeek, which has quickly gained traction, even outperforming established models like those from Meta AI and OpenAI.

This development has raised doubts about U.S. leadership in AI and the profitability of major tech firms, leading to a reevaluation of stock prices across the board.

Louis Gave from Gavekal Research referred to this moment as a “Sputnik Moment,” suggesting that it could significantly impact investor confidence in U.S. tech stocks.

Dow Jones Industrial Average

Futures linked to the Dow Jones Industrial Average (DJIA) also reflected this negative sentiment, dropping about 0.2% prior to market opening.

The Dow today managed to hold onto slight gains amidst the broader market sell-off, contrasting with the declines seen in the Nasdaq Composite and S&P 500 index.

In addition to Nvidia, other tech giants like Broadcom and Constellation Energy stock were also affected, with significant losses reported across the sector.

As investors brace for upcoming earnings reports from major players including Microsoft and Tesla, attention will be focused on how these companies respond to the competitive threat posed by DeepSeek.

The overall performance of stocks today highlights a worrying trend for investors: after two consecutive weeks of gains that had pushed major indices to record highs, today’s downturn raises questions about the sustainability of growth driven by AI demand.

With the Federal Reserve set to meet this week, discussions around interest rates could further influence market dynamics.

As traders digest these developments, many are left wondering why Nvidia is down and how this will affect the broader tech landscape moving forward.

The implications of DeepSeek’s advancements are being closely monitored as investors reassess their strategies in light of this new competitive landscape in artificial intelligence.

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