LONDON : Tech stocks nudged lower on Tuesday with chipmaker Nvidia falling 2 per cent in early trade, a day after it suffered the biggest one-day market capitalisation loss in history, though traders did shift back out of safe-haven currencies into the dollar.
While the mood was far calmer than it was on Monday, share markets still struggled to regain much of the ground they had lost, and the three main U.S. share benchmarks all hovered either side of flat in early trade.
The S&P 500, was last down 0.2 per cent at 5,998.4 and the Nasdaq dropped a similar amount to 19,309. [.N]
Both, particularly the Nasdaq, tumbled sharply on Monday as chip giant Nvidia dived 17 per cent, wiping off nearly $593 billion in the biggest one-day market capitalisation loss in history.
Behind the rout was the emergence of a low-cost Chinese artificial intelligence model, DeepSeek, which made investors question the dominance of AI bellwethers and their suppliers, which have sent shares of tech companies and chip firms soaring.
“When you look at valuations, we all know that they are expensive, especially tech valuations, but they are expensive for a reason, namely earnings growth,” said Yvan Mamalet, senior economist at Kleinwort Hambros.
“The news yesterday was saying maybe the earnings growth will not be as good as what the market was expecting,” he said.
“The point is AI is a massive disruption, and, in the past, when you had disruption, you always had new players coming in and trying to challenge the major players. That’s the game all these companies are in,” Mamalet added.
Investors’ reassessment of developments in the AI sector will also heighten investor interest in this week’s earnings at Microsoft, Tesla and Meta. Executives can expect to be asked whether they still plan to spend so much on computing power.
Tuesday’s earnings news was from Boeing whose shares rose 4.8 per cent even after the planemaker reported its biggest annual loss since 2020, as investors saw the report not as bad as they had feared.
European tech stocks stabilised Tuesday, and the broad Stoxx 600 share benchmark hit a new intraday high, a sign how strongly shares have been performing in recent weeks. [.EU]
But it was not all calm, as selling pressure remained in Japan for a second day with Nvidia supplier Advantest now down 19 per cent in two days. [.T]
DON’T FORGET TARIFFS
While DeepSeek gave investors something to think about other than President Donald Trump’s tariff and other policies, trade tensions remained in the mix, and also supported the dollar, and drove investors back out of Treasuries.
New U.S. Treasury Secretary Scott Bessent is pushing for a gradual rise in universal tariffs starting from 2.5 per cent, and potentially up to 20 per cent, the Financial Times reported, and Trump later said that he wants “much bigger” tariffs than 2.5 per cent and is considering targeted duties on products like steel, copper and semiconductors.
The euro was down 0.6 per cent at $1.0431, while safe-haven currencies, which had appreciated Monday, gave back their gains. The dollar was last up 0.4 per cent on the Japanese yen at 155.08, and up 0.3 per cent on the Swiss franc at 0.9042.
Similarly, U.S. Treasuries, which rallied on Monday as part of the risk-off move, reversed course and benchmark 10-year yields were last two basis points higher at 4.55 per cent. [US/]
Of note in European rates markets was the spread between French and German 10-year yields, which blew out last year on French political uncertainty. The spread narrowed to 72 bps, its tightest since mid November, as investors hope the current government may be able to pass a budget. [GVD/EUR]
There are also central bank meetings for bond and currency investors to grapple with. The Federal Reserve is expected to keep rates steady at its meeting which concludes Wednesday, and the European Central Bank is expected to cut rates by 25 bps on Thursday.
Oil prices recovered some of Monday’s losses, with benchmark Brent crude futures up 0.8 per cent at $77.75 a barrel and gold, which had slipped as investors liquidated bullion to cover losses, hovered around $2,742 an ounce.
(Editing by Ros Russell)
