Nasdaq, S&P 500 fall as China's DeepSeek AI model hits tech shares

NEW YORK - The S&P 500 and the Nasdaq ended sharply lower on Jan 27 as Nvidia and other chipmakers sold off after surging popularity of a

low-cost Chinese artificial intelligence model raised investor worries

about the outlooks for current AI leaders in the United States.

Nvidia’s shares sank, while an index of semiconductor stocks had its biggest single-day percentage fall since March 2020.

Chinese startup DeepSeek has rolled out a free assistant it says uses cheaper chips and less data, raising questions about investor expectations that AI will drive demand along a supply chain from chipmakers to data centres.

DeepSeek’s AI Assistant by Jan 27 had overtaken US rival ChatGPT in downloads from Apple’s App Store.

Ms Kim Forrest, chief investment officer at Bokeh Capital Partners in Pittsburgh, said there are still many questions about the DeepSeek model and its impact.

“Today is a drubbing for these stocks, but I don’t necessarily think whatever’s going to happen in the short while here - the next couple of days - is where they are ultimately valued,” she said.

According to preliminary data, the S&P 500 lost 87.85 points, or 1.44 per cent, to end at 6,013.39 points, while the Nasdaq Composite lost 607.47 points, or 3.04 per cent, to 19,346.83. The Dow Jones Industrial Average rose 291.54 points, or 0.67 per cent, to 44,715.79.

Nvidia and other big technology-related companies drove the stock market’s sharp gains in recent years.

Among other big tech-related companies, Microsoft and Google-parent Alphabet also were down, while AI server maker Dell Technologies fell sharply.

Data centre operators also tanked, including Digital Realty. The Cboe Volatility Index, known as Wall Street’s “fear gauge”, rose. Earnings from some big technology companies are due this week, including from Microsoft.

Financial markets also were digesting news that the US and Colombia

pulled back from the brink of a trade war

on Jan 26 after the White House said the South American nation had agreed to accept military aircraft carrying deported migrants.

Investors also are keen to hear from the Federal Reserve, which is widely expected to hold its lending rate steady in its first interest-rate decision of the year due on Jan 29. REUTERS