Daily Summary: Markets React to Chinese AI Development

Major US indices faced heavy selling pressure today, with tech stocks leading the decline. The Nasdaq 100 plunged 3.4% while the S&P 500 dropped 1.9%, as investors grappled with implications of Chinese AI advancement. The tech-heavy selloff was partially offset by defensive sectors, with utilities and consumer staples showing relative strength.

European indices closed mostly in red, albeit with more modest losses than those observed on Wall Street. German DAX (-0.53%) and French CAC40 (-0.27%) are the biggest losers today, Italian FTSE MIB and British FTSE 100 trade flat, while Swiss SMI adds 1.05%.

Nvidia experienced its largest-ever market value drop, plummeting 16.6% and erasing over $400 billion in market cap following DeepSeek's AI announcement. The Chinese startup's ability to develop a competitive AI model for just $6 million sparked concerns about excessive infrastructure spending by US tech giants. The selloff spread across the semiconductor sector, with Marvell Technology falling 17.9%, Broadcom dropping 18.5%, and AMD declining 6.2%.

Apple shares bucked the tech sector decline, rising 3.4% as investors rotated into companies with measured AI investments. The iPhone maker's relatively conservative approach to AI spending and focus on device-based implementations appeared to shield it from the broader tech selloff. The company's strategy of developing smaller AI models tailored for its devices is increasingly viewed as prudent amid growing scrutiny of large-scale AI infrastructure investments.

AT&T delivered strong Q4 2024 results, with shares climbing 6.8% after beating analyst expectations. The telecom giant reported revenue of $32.3 billion and adjusted EPS of $0.54, driven by robust growth in both mobile phone customers (482,000 net adds) and fiber internet subscribers (307,000 net adds). Management reaffirmed 2025 guidance and plans to complete the DirecTV sale by mid-2025.

On the Forex market, Japanese yen heavily outperformed its G10 peers, gaining 1.05% against the USD. Dollar Spot Index retracts 0,1% despite positive macroeconomic data, due to rising uncertainty over Fed’s upcoming meeting.

Energy infrastructure stocks faced a brutal selloff as DeepSeek's efficient AI model threatened data center power consumption outlook. Vertiv Holdings led declines, tumbling 25.9%, while GE Vernova dropped 18.8%, and Vistra fell 24.2%. Constellation Energy, the largest US nuclear plant operator, plunged 19% as investors reassessed future energy demand from data centers.

The US housing market showed resilience with new home sales climbing 3.6% to 698,000 units in December, surpassing expectations of 675,000 units. The positive data signals continued momentum despite rising mortgage rates, with total 2024 sales reaching 683,000 units, up 2.5% from 2023.

Cryptocurrency markets attempted to stabilize despite the tech sector turmoil, with Bitcoin defending the key psychological level of $100,000. Ethereum struggled to maintain support at $3,100, while Chainlink lost nearly 10% and Dogecoin retreated 6%. Bitcoin ETF inflows remained positive on Friday at over $500 million, though investors are closely monitoring potential outflows amid market volatility.

The Dallas Fed Manufacturing Index surged to 14.1 in January, substantially exceeding expectations of 0 and marking significant expansion in Texas manufacturing activity. The production index climbed to 12.2, while new orders reached their highest level since April 2022 at 7.7, suggesting robust manufacturing conditions in the region.

Natural gas futures declined as weather forecasts predicted milder conditions in early February, with the front-month Nymex contract dropping 6.6% to $3.21. The decline comes despite last week's severe Arctic blast across the U.S., which is expected to result in a substantial withdrawal in this week's inventory report and potentially shift the surplus over the 5-year average to a deficit.