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.
(WASHINGTON) — Consumer prices rose 2.7% in November compared to a year ago, ticking upward from the previous month and potentially giving pause to the Federal Reserve as it weighs an interest rate cut expected next week. The reading matched economists’ expectations.
The fresh data marked two consecutive months of rising inflation, extending a bout of accelerated price increases that has reversed some of the progress made in lowering inflation earlier in the year.
The inflation gauge makes up the last piece of significant economic data before the Fed announces its next interest rate decision on Dec. 18. A finding of accelerated price hikes may give the Fed pause as it weighs interest rate cuts.
The inflation gauge makes up the last piece of significant economic data before the Fed announces its next interest rate decision on Dec. 18.
Core inflation — a closely watched measure that strips out volatile food and energy prices — increased 3.3% over the year ending in November, matching the previous month, the data showed.
Food prices rose 2.4% in November compared to a year ago, matching the previous month and marking slower price increases than the overall inflation rate.
Prices fell in November compared to a year ago for an array of household staples like cereal, rice, flour, bread, bacon and seafood.
Over that period, the price of eggs soared more than 37%, however, as a result of an avian flu that has depleted supply. Prices for sugar, butter and pork chops also rose faster than the overall inflation rate.
Inflation has slowed dramatically from a peak of more than 9% in June 2022, but price increases remain slightly above the target rate of 2%.
In recent months, the Fed has cut its benchmark rate three quarters of a percentage point, dialing back its yearslong fight against inflation and delivering relief for borrowers saddled with high costs.
The Fed is expected to cut interest rates by another quarter of a percentage point at its meeting next week, according to the CME FedWatch Tool, a measure of market sentiment.
Over time, rate cuts ease the burden on borrowers for everything from home mortgages to credit cards to cars, making it cheaper to get a loan or refinance one. The cuts also boost company valuations, potentially helping fuel returns for stockholders.
In theory, the policy eases access to funds, stimulates economic activity and boosts demand. But the promise of bolstered consumer strength risks increased prices.
Speaking at a press conference in Washington, D.C., on Thursday, Fed Chair Jerome Powell voiced optimism about the prospects for achieving a “soft landing,” in which the U.S. averts a recession while inflation returns to normal.
“We continue to be confident that with an appropriate recalibration of our policy stance, strength in the economy and labor market can be maintained with inflation moving sustainably down to 2%,” Powell said.
The trajectory of inflation could shift in the coming months. Some economists expect President-elect Donald Trump’s proposals of heightened tariffs and the mass deportation of undocumented immigrants to raise consumer prices.
When asked about the Fed’s potential response to Trump’s policies, Powell said the central bank would make its rate decisions based on how any policy changes impact the economy.
“In the near term, the election will have no effects on our policy decisions,” Powell said. “We don’t know what the timing and substance of any policy changes will be. We therefore don’t know what the effects on the economy will be.”
“We don’t guess, we don’t speculate and we don’t assume,” Powell added.
(WASHINGTON) — Autoworkers, farmers and alcohol distillers are among a set of U.S. workers who risk losing their jobs as a result of potential tariffs on Canada, China and Mexico, experts told ABC News.
The U.S. president was expected to sign executive orders on Tuesday putting in place the 25% tariffs on goods from Mexico and Canada and 10% tariffs on those from China, according to the White House.
Trump announced on Monday that the proposed tariffs on most goods from Canada and all products from Mexico would be paused for one month, putting the policies on schedule to take effect in early March. The postponements came following conversations Trump had with Mexican President Claudia Sheinbaum and Canadian Prime Minister Justin Trudeau. Trump said Monday afternoon he plans to talk to China in the next day or two about tariffs on that country.
Some U.S. shoppers and economists have raised alarm about the potential for tariff-driven price increases, since importers typically pass along a share of the cost of the higher taxes to consumers.
A lesser-known effect of the potential tariffs, however, could arise as some retailers struggle to sell imported goods at competitive prices while manufacturers reckon with higher costs of raw materials such as car parts and lumber, experts said. Sales could wobble, they added, leading directly to job cuts.
Potential retaliatory tariffs slapped on U.S. exports could prove another cause of layoffs, the experts said, since U.S. firms dependent on selling products overseas risk weakened performance.
“It’s like Trump took a grenade and threw it into the economy, and he walked away to see what happens,” Rob Handfield, professor of operations and supply chain management at North Carolina State University, told ABC News.
The Trump administration did not immediately respond to ABC News’ request for comment.
In a series of social media posts over the weekend, Trump said the tariffs target Canada, Mexico and China for hosting the manufacture and transport of illicit drugs that end up in the United States. In a Truth Social post on Sunday, Trump urged the three countries to address his concerns, while acknowledging the tariffs may cause some financial hardship within the U.S.
“WILL THERE BE SOME PAIN? YES, MAYBE (AND MAYBE NOT!). BUT WE WILL MAKE AMERICA GREAT AGAIN, AND IT WILL ALL BE WORTH THE PRICE THAT MUST BE PAID,” Trump wrote.
In recent days, some trade associations and labor unions voiced warnings about tariff-related job losses.
Jay Timmons, president and CEO of the National Association of Manufacturers, said small- and medium-sized firms in the sector employing millions of Americans risk “significant disruptions” as a result of potentially high energy prices and costly supply chain workarounds.
“Manufacturers will bear the brunt of these tariffs,” Timmons said, adding that the policies would put “American jobs at risk.”
Distilled Spirits Council, a trade association representing alcohol makers across North America, cautioned that tariffs would harm business in all three countries. “Maintaining fair and reciprocal duty-free access for all distilled spirits is crucial for supporting jobs and shared growth,” the group said.
The risks for U.S. workers are perhaps best demonstrated by the auto industry, which employs about 4 million people, experts said.
U.S. automakers hold deep ties to Canada and Mexico, since products often snake back and forth between the countries before a car reaches full assembly, Christopher Conlon, a professor of economics at New York University who studies trade, told ABC News.
Mexico and Canada make up the top two U.S. trading partners for both finished motor vehicles and car parts, according to a Cato Institute analysis of data from the U.S. International Trade Commission.
“The supply chains involve shipping parts back and forth over the border five times, six times, seven times. If every time a part crosses the Canadian border it gets taxed at 25%, that will add up really quickly,” Conlon said, noting the added costs could hike car prices by as much as $10,000 and, in turn, weaken sales.
“The companies will have to scale back production, and that will mean fewer shifts,” Conlon added.
The production slowdown may lead to job cuts at companies indirectly impacted by the tariffs, such as car dealerships and auto-part sellers, experts said. More than 550,000 workers at car dealerships representing international brands risk losing their jobs if the industry falters due to the tariffs, the American International Automobile Dealers Association told ABC News in a statement.
To be sure, employment may grow in some domestic industries protected by the tariffs, such as the steel and energy sectors, some experts said. Even those businesses, however, may contend with challenges if the tariffs limit consumer demand, they added.
Potential job gains in some sectors would not outweigh the losses in others, Jason Miller, a professor of supply chain management at Michigan State University, told ABC News.
“It’s very difficult to see a net positive of this in terms of employment for the U.S.,” Miller said.
(WASHINGTON) — President Joe Biden on Friday announced a decision to block the $14 billion acquisition of U.S. Steel by Japan-based Nippon Steel, saying domestically produced steel is essential to U.S. national security.
“Without domestic steel production and domestic steel workers, our nation is less strong and less secure,” Biden said in a statement.
The move marks the latest effort on the part of the Biden administration to protect U.S. markets from foreign-owned firms.
Biden has preserved many of the tariffs imposed by former President Donald Trump, and he enacted a law that would ban China-based social media platform TikTok later this month if the company doesn’t find a new parent company. The Supreme Court is set to hear arguments this month in a legal challenge brought by TikTok.
The decision comes weeks after a federal committee declined to issue a recommendation on the merger, leaving Biden an opportunity to block the deal.
The Committee on Foreign Investment in the United States, tasked with the potential acquisition, shared concerns about the national security risks posed by the loss of the country’s second-largest steel producer.
In response to the committee’s decision, Nippon Steel alleged the White House had “impermissible undue influence” on the review. Nippon Steel has previously threatened to challenge the White House decision in court.
The fate of U.S. Steel – a storied 120-year-old firm based in Pittsburgh, Pennsylvania – became a lightning rod during the 2024 election season.
This is a developing story. Please check back for updates.
