A look at the day ahead in U.S. and global markets from Mike Dolan
The AI-related stock shakeout seems to have calmed as investors turn to megacap tech earnings – with the Federal Reserve set to pause its easing campaign in its first policy decision for 2025 just as central banks in Canada and Sweden cut again.
The hoopla over the arrival of China’s cheap artificial intelligence model DeepSeek continues to reverberate, even though giant U.S. chip firms like AI darling Nvidia have clawed back at least some of Monday’s steep losses.
Up again ahead of Wednesday’s bell Nvidia’s shares look set to have recovered just over half of the 17% plunge at the start of the week – a moved that lopped more than half a trillion dollars off its overall market value.
The whole episode has reintroduced two broader market fears – the concentration of broad index fortunes in a handful of outsize tech stocks, and whether the hundreds of billions of dollars of investment spending in AI development by many firms is really worth it longer term.
On the latter issue at least, quarterly updates from first three of the so-called ‘Magnificent Seven’ megacaps on Wednesday may tell a tale as Microsoft, Meta and Tesla report after the bell tonight.
With China’s markets closed for the lunar new year holiday, there was a scramble to find out more about DeepSeek.
U.S. officials said they’re looking at the national security implications of the Chinese wonder app, while President Donald Trump’s crypto czar said it was possible that intellectual property theft could have been at play. Both OpenAI and Microsoft say they are looking at the extent to which their tech had been copied.
Chinese tech behemoth Alibaba, meantime, released a new version of its Qwen 2.5 AI model – claiming it surpassed the highly-acclaimed DeepSeek-V3. Its U.S.-listed stock was 2% higher before Wednesday’s open.
Global investors, such as Norway’s $1.8 trillion wealth fund, said they were surprised about the DeepSeek development and fretted about tech concentration risk in portfolios.
But boss Nicolai Tangen said on Wednesday that the wealth fund had a small underweight in tech stocks before this and warned that last year’s big market returns – which bagged it a record $222 billion annual profit – may not be repeated. “I just want to warn again that this will not last forever.”
U.S. stock futures were marginally higher on Wednesday although European stocks powered ahead to new records, helped by an 11% surge in chip equipment maker ASML after strong earnings. The European technology sector at large surged 4.5% – its best single day in a year.
