The S&P 500 futures are down 134 points, Nasdaq 100 futures have dropped by 830 points, and Dow Jones Industrial Average futures are down 322 points before the market opens.
AI-related stocks are facing a downturn after China's DeepSeek R1 release, which is seen as comparable to OpenAI's ChatGPT. It's reported that the new model might be more cost-effective and operate on less advanced chips.
NVIDIA (NVDA, Financial) is significantly affected by these developments, experiencing a 12% decrease ahead of the market opening.
Treasury yields are lowering as investors seek safety amidst falling equities, with the 10-year yield down by 11 basis points to 4.52%.
This week, the earnings season intensifies with major companies like Apple (AAPL, Financial), Microsoft (MSFT, Financial), Meta Platforms (META, Financial), Amazon.com (AMZN, Financial), and Tesla (TSLA, Financial) set to report their results.
An FOMC meeting is expected to keep the current fed funds rate range unchanged at 4.25-4.50%.
The economic schedule for today includes the December New Home Sales report, which comes out at 10:00 ET.
The release of DeepSeek's R1 large language model has sent shockwaves through the tech industry, causing significant declines in major AI-linked stocks. Nvidia (NVDA, Financial) saw an 11% drop, while Microsoft (MSFT, Financial) and AMD (AMD, Financial) fell by 6% each. Broadcom (AVGO, Financial) tumbled 12%, and both Meta Platforms (META, Financial) and Alphabet's Google (GOOGL, Financial) decreased by around 3.5%. Wedbush Securities views this as a potential buying opportunity despite the perceived threat to U.S. tech dominance from China's DeepSeek.
Amid the tech sector's turmoil, Aurora Mobile's shares skyrocketed by 207% premarket. The surge followed the integration of DeepSeek R1 into its GPTBots.ai platform, which enhances the platform's AI capabilities, already supported by models from OpenAI, Meta, and Microsoft (MSFT, Financial). Aurora Mobile's announcement highlighted the model's efficiency and adaptability, contributing to the broader market's AI-driven innovations.
SoFi Technologies (SOFI, Financial) experienced a 15% drop in premarket trading after releasing guidance that fell short of Wall Street's expectations. Despite a slight beat in Q4 EPS, its 2025 guidance for GAAP EPS and adjusted net revenue was below consensus. The company remains optimistic about its growth, expecting to see increases in adjusted EBITDA and tangible book value growth in the coming years.
Oppenheimer analysts suggest that the DeepSeek AI model release could be beneficial for semiconductor equipment companies like Applied Materials (AMAT, Financial), KLA Corp. (KLAC, Financial), and Lam Research (LRCX, Financial). Despite recent declines, these companies could see long-term demand growth as the AI landscape evolves, potentially lowering entry costs and expanding the buyer pool.
AT&T (T, Financial) reported better-than-expected subscriber growth, adding 482,000 new wireless subscribers, although it was slightly offset by a disappointing profit outlook for FY25. The company saw increased revenue due to its mobility business and fiber account additions, reflecting a positive trend in subscriber gains.
Tesla (TSLA, Financial) faced early trading declines as DeepSeek's AI model raised concerns over the AI premiums in tech stocks. Tesla's ongoing investments in AI infrastructure, including its Dojo supercomputer and Cortex cluster, underscore its commitment to AI development despite market uncertainties.
MicroStrategy (MSTR) announced a proposed offering of 2.5 million shares of its Series A Perpetual Strike Preferred Stock. The proceeds will be used for corporate purposes, including bitcoin acquisitions. This move aligns with MicroStrategy's strategy to leverage its financial resources for growth and investment in cryptocurrencies.
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