Nvidia, Microsoft shares tumble as China-based AI app DeepSeek hammers tech giants
Nvidia CEO Jensen Huang/ Photo Credit: PATRICK T. FALLON/AFP via Getty Images
(NEW YORK) — The emergence of China-based AI app DeepSeek sent shares plummeting on Monday for many U.S. tech giants, including chipmaker Nvidia and AI-backer Microsoft.
Nvidia, which helped catapult market wide gains in recent years, saw its share price plummet by more than 12% in early trading on Monday. Shares of Microsoft, a major stakeholder in ChatGPT-maker OpenAI, fell about 4.5%.
The tech-heavy Nasdaq fell more than 3% in early trading on Monday. The Dow Jones Industrial Average and S&P 500 also inched downward.
The DeepSeek chatbot — which responds to user queries, just like its U.S.-based counterparts — stands atop the Apple app-store charts. Early testing suggests that the quality of DeepSeek rivals that of U.S.-based AI products.
Developers of the system powering the AI, called DeepSeek-V3, published a research paper indicating that the technology relies on much fewer specialized computer chips than its U.S. competitors.
DeepSeek has emerged despite export controls issued by the Biden administration that prohibit U.S. manufacturers from selling such specialized chips to firms in China.
Ivan Feinseth, a market analyst at Tigress Financial, described DeepSeek as “the first shot at what is emerging as a global AI space race.”
“The potential power and low-cost development of DeepSeek is calling into question the hundreds of billions of dollars committed in the U.S,” Feinseth said in a note to clients on Monday.
Alphabet, the company behind AI chatbot Gemini, saw shares drop about 3% on Monday. The stock price of Amazon, which offers its own AI-fueled shopping assistant, also fell about 3%.
The dip interrupts a yearslong surge for many tech giants, driven in part by enthusiasm about the future of AI. The tech-heavy Nasdaq climbed more than 30% in 2024, sustaining much of its sky-high 43% growth over the year prior. Many analysts expected those robust gains to continue this year.
“When expectations are high, one skeptical headline can knock the market off its axis. That’s exactly what we’re seeing today,” Callie Cox, chief market strategist at Ritholtz Wealth Management, said in a statement on Monday.
(NEW YORK) — A surging stock market, low unemployment and robust growth — by just about every measure, the economy stood poised to deliver victory for Vice President Kamala Harris.
The exception, of course, was inflation, and it appears to have overshadowed other indicators. More than two-thirds of voters say the economy is in bad shape, according to the preliminary results of an ABC News exit poll.
Inflation likely shaped negative voter perceptions of the economy and helped fuel anger toward the party in power, just as it has done across the globe since the pandemic unleashed a wave of rapid price increases, experts told ABC News.
The political potency of inflation stems from the visceral, recurring sense of unease caused by high prices, experts added. That feeling leaves voters insecure about their future and desperate for a leader who can change the nation’s course.
“Inflation has a specific and special power in elections,” Chris Jackson, senior vice president of public affairs for Ipsos in the U.S., told ABC News. “It’s something people see in their face every day — every time they go to the grocery store or fill up their car.”
He added, “Inflation is present in people’s lives. It’s something they’re unhappy with and it’s something they rightly or wrongly blame on whoever is in charge.”
The pandemic set off an acute bout of inflation that impacted nearly every country across the world, when global supply chain blockages caused an imbalance between the availability of goods and the demand for them. In other words, too much money chased too few products.
Prices began to rise rapidly in the U.S. in 2021, catapulting the inflation rate to a peak of about 9% the following year. Inflation soared even higher in many other countries, including the likes of Brazil and England, where leaders faced an angry electorate.
In Brazil, where President Jair Bolsonaro cut taxes on fuel and electricity in an effort to slash prices over the months preceding an election that concluded in October 2022, the nation nevertheless replaced him with a leftwing challenger.
Earlier that year, in England, Prime Minister Liz Truss responded to the highest inflation in four decades with an economic policy centered on tax cuts and energy price controls. Her tenure in office lasted just 44 days before market reaction and political disarray led to her stepping down.
The post-pandemic pattern has exemplified a high rate of leadership change amid inflation crises around the world over the last half century, according to a study by Eurasia Group, a political risk consultancy firm. Examining 57 inflation shocks since 1970, the firm found government turnover in 58% of cases.
Further, when there was an election during or within two years of an inflation shock, it led to a change in government in roughly three out of every four instances, according to Eurasia Group.
“We’re seeing this trend on jet fuel after the pandemic,” said Robert Kahn, the managing director of global macro-geoeconomics at the New York-based Eurasia Group. “The pandemic inflation shock contributes to a sense of instability and a loss of confidence among people in their governments.”
Carola Binder, an economics professor at the University of Texas at Austin who studies the history of inflation in the U.S., characterized recent anti-incumbent sentiment in a slightly different way: “When people are experiencing inflation and suffering from it, they want to have someone or something to blame.”
Inflation has cooled dramatically over the past two years, now hovering near the Federal Reserve’s target rate of 2%. Even so, that progress hasn’t reversed a leap in prices that dates back to the pandemic. Since President Joe Biden took office in 2021, consumer prices have skyrocketed more than 20%.
The potential role of inflation in the U.S. election owes to a typical lag between when inflation comes down and when consumers acclimate to new price levels, since a lower inflation rate does not mean prices have come down but rather that they have begun to increase at a slower pace, experts told ABC News.
“When inflation comes back down, the prices of many critical items remain high, especially for people who are stretched and living paycheck to paycheck,” Kahn said.
Consumers will likely acclimate to current price levels over the coming months, but voters will remain sensitive to inflation, experts said.
President-elect Donald Trump’s proposals of heightened tariffs and the mass deportation of undocumented immigrants risk rekindling rapid price increases, some experts said.
When asked about whether inflation could reemerge as an important issue ahead of the next midterm elections in 2026, Jackson said: “If Republicans shoot themselves in the foot, absolutely.”
(NEW YORK) — Online holiday shopping soared to a fresh record high in 2024, driven by an array of e-commerce discounts and adoption of AI-fueled shopping assistants, according to data released on Tuesday by Adobe.
E-commerce sales topped $240 billion in November and December, climbing nearly 9% when compared with the gift-buying season a year prior, data showed.
The data indicated that three product categories accounted for more than half of the online holiday spending: electronics, apparel and home goods.
Spending on cosmetics totaled nearly $8 billion, jumping more than 12% compared to a year prior. That marked the largest year-over-year spending increase for any product category, the data showed.
Discounts helped drive strong sales for some high-priced items, Adobe said, pointing to a 20% jump in units sold for expensive goods.
The fresh data indicated a spike in use of shopping assistants powered by generative AI, suggesting the technology has seeped into the retail sector’s busiest time of the year.
Traffic to retail sites from generative AI-powered chatbots skyrocketed 1,300% over November and December when compared to the same period a year prior, the data showed.
The share of consumers arriving via AI shopping assistants remains modest, however, Adobe said. Shoppers arrived at retail sites via links shared by the chatbots.
“The 2024 holiday season showed that e-commerce is being reshaped by a consumer who now prefers to transact on smaller screens and lean on generative AI-powered services to shop more efficiently,” Vivek Pandya, a lead analyst at Adobe Digital Insights, said in a statement.
The e-commerce data comes weeks after initial indicators pointed to a robust holiday shopping season.
Overall holiday spending surged in 2024, blowing past expectations and outpacing customer purchases over the gift-buying season last year, according to data released by Mastercard SpendingPulse last month.
The end-of-year flex of consumer strength marks the latest indication of resilient U.S. buying power, which has kept the economy humming despite a prolonged stretch of high interest rates.
Gross domestic product grew at a solid 2.8% annualized rate over three months ending in September, the most recent quarter for which data is available.
The labor market has slowed but proven sturdy. The unemployment rate stands at 4.2%, a historically low figure.
Consumer spending accounts for nearly three-quarters of U.S. economic activity.
The increase in holiday spending coincided with an initial bout of relief for borrowers, as the Federal Reserve cut interest rates by a total of one percentage point over the final few months of the year.
However, interest rates still stand at a historically high level of between 4.25% and 4.5%.
Lower interest rates typically stimulate economic activity by making it easier for consumers and businesses to borrow, which in turn fuels investment and spending. But interest rate cuts usually influence the economy after a lag of several months, meaning the recent lowering of rates likely had little impact on holiday spending.
(ISSAQUAH ,WA) — In pursuit of increased wages and renegotiated employee benefits, more than 18,000 Costco union members nationwide voted to authorize a strike if the wholesale company doesn’t agree to their terms by Jan. 31.
The looming Costco strike marks the latest in a string of Teamsters union walkouts from employees of industry giants including Amazon and Starbucks.
The strike was approved on Sunday with more than 85% of Costco Teamsters voting in favor of hitting the picket lines if demands aren’t met.
The union said Costco had rejected contract proposals that included increased seniority pay, paid family leave, bereavement policies, sick time and safeguards against surveillance.
Bryan Fields, a Costco employee in Baltimore and member of Teamsters Local 570, told ABC News that the strike deadline comes after months of stalled conversations, extensions and failed negotiations with the company.
“They had plenty of months to negotiate and they would extend, extend, extend,” Fields, who has worked for the membership-only retailer for over a decade, claimed.
He and Teamsters spokesperson Matt McQuaid said negotiations with the company have been ongoing since August, without agreement.
ABC News has reached out to Costco Wholesale for a comment.
“No one wants to strike, no one’s excited about doing anything like that, and I’m sure they don’t want us to do that as well,” Fields said of the company, adding, “Let’s bypass all of that and just do what they promise in their code of conduct, which is ‘take care of employees.'”
According to Teamsters, Costco recently reported $254 billion in annual revenue and $7.4 billion in net profits, which marked a 135% increase since 2018.
While the details of the union’s negotiations with Costco’s top brass remain fluid, according to McQuaid, employees are “fully prepared” to picket come Feb. 1 if an agreement is not reached.
Last week hundreds of Costco Teamsters nationwide organized practice pickets from Hayward, California, to Sumner, Washington, and Long Island, New York, the organization said in a press release Sunday.
The 18,000 Teamsters union members who voted to authorize the strike account for 8% of Costco’s mostly non-union employees.
“Our members have spoken loud and clear — Costco must deliver a fair contract, or they’ll be held accountable,” Teamsters General President Sean M. O’Brien said in the release.
“From day one, we’ve told Costco that our members won’t work a day past January 31 without a historic, industry-leading agreement. Costco’s greedy executives have less than two weeks to do the right thing. If they refuse, they’ll have no one to blame but themselves when our members go on strike,” O’Brien added.
As of this month, there were 624 Costco Wholesale locations across the country.
The membership-only warehouse club chain is the third-largest retailer in the world behind Walmart and Amazon, with over 600 locations across the U.S.
Fields says employees who are the “backbone” of the multi-billion-dollar company’s success just want a “piece of the pie.” He hopes Costco can reach an agreement with union members before the strike terms expire, saying, “It’s in their hands right now.”
“The union is simply a voice of the people. They choose whether we become the weapon for the people. It’s as simple as that,” Fields said.
