Al Root

Anyone unsure of how important artificial intelligence was to the entire stock market just has to look at early Monday trading to be convinced.

A host of U.S. stocks in many sectors were taking it on the chin Monday after Chinese AI app DeepSeek topped Apple's app chart over the weekend. DeepSeek appears to perform as well as other AI apps such as OpenAI's ChatGPT. DeepSeek also appears to have been developed at a fraction of the cost of other AI apps.

That has spooked, well, everyone.

S&P 500 and Dow Jones Industrial Average futures were down 2.1% and 0.7%, respectively. Nasdaq Composite futures were down 3.6%. Nvidia stock was down 11.4%. Microsoft and Alphabet shares were down about 3.7% and 3.4%, respectively.

Those three are key AI players. Nvidia makes the chips that power AI data centers at Microsoft and Google parent Alphabet. But a host of manufacturers make products that go into the data centers.

Shares of electrical-components makers TE Connectivity and Amphenol are down about 2% and 10%, respectively. TE's AI-related business would amount to about $600 million in 2025. Total 2025 sales should top $16 billion. At Amphenol, "IT Datacom" amounts to about 25% of sales.

Shares of electrical-infrastructure-equipment provider Eaton were down about 8% in premarket trading. Shares of peer Schneider Electric were down more than 9% in trading on European bourse Euronext Exchange. Both companies sell equipment for AI data centers.

So does HVAC company Trane Technologies, and even backup power player Generac. Shares of those two are down about 6% and 2%, respectively.

The U.S. has about 5,400 data centers, roughly 50% of the world's total, according to Futrum Group, a technology research firm. Growth in the data-center business is a key part of the growth story for many U.S. manufacturing firms. Anything that shakes the confidence in AI growth, therefore, shakes confidence in just about everything.

What's more, AI data centers are particularly power hungry which also impacts power generation plays. Shares of GE Vernova are down 16% in premarket trading. Shares of Constellation Energy are down more than 13%.

DeepSeek was just released in January. The market has taken a sell-first and ask-questions-later approach. Figuring out exactly what's going on will be the most important thing for investors to do in the coming days and weeks.

They will be trying to minimize losses and trading errors in the meantime.

Write to Al Root at allen.root@dowjones.com

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January 27, 2025 09:14 ET (14:14 GMT)

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