U.S. and Global Markets Overview

(Reuters) – A look at the day ahead in U.S. and global markets by Amanda Cooper, Finance and Markets Breaking News Editor, Europe.

Market Overview

Stocks are experiencing significant declines on Monday, particularly in the technology sector, with major companies like Nvidia (NASDAQ:NVDA), Qualcomm (NASDAQ:QCOM), and Intel (NASDAQ:INTC) facing steep drops.

The catalyst for this downturn was the hype surrounding the recent launch of Chinese startup DeepSeek’s AI counterpart to ChatGPT, which has surged to the top spot for downloads on the Apple Store. Online searches for “DeepSeek” have skyrocketed over the past week, while interest in its larger competitor has remained flat.

Impact on Major Companies

With four out of the so-called “Magnificent Seven” expected to report earnings this week, DeepSeek’s emergence as a potential competitor to Western AI services serves as a reality check for investors who have been heavily investing in high-valuation tech stocks on the promise of significant AI returns.

According to asset manager Federated Hermes (NYSE:FHI), the Magnificent Seven now represent a third of global market value, up from about a fifth two years ago. This group includes industry giants such as Apple, Microsoft (NASDAQ:MSFT), Nvidia, and Meta (NASDAQ:META).

DeepSeek launched its open-source reasoning model, DeepSeek-R1, claiming it rivals OpenAI’s offerings in performance. Recent tests indicated that DeepSeek’s V3 large language model surpassed those of OpenAI and Meta, all while operating on a smaller budget and intending to charge users less.

Background on AI Market

OpenAI initiated the AI race with the ChatGPT launch in November 2022. Nvidia, whose supercomputing chips are crucial for AI, contributed to the stock market rally with outstanding earnings reported in May 2023, lifting its valuation above $1 trillion. Since then, Nvidia shares have surged 250%, with other Magnificent Seven stocks benefiting but to a lesser extent.

Recently, U.S. President Trump announced a $500 billion private-sector AI investment plan to outpace global competitors. As a result, Oracle (NYSE:ORCL), part of the investment consortium with Japan’s SoftBank (TYO:9984) and OpenAI, saw a 7% uptick in its stock, marking its second-largest trading volume in a year.

Although delays in AI rollouts and rising development costs have tested investor confidence in Wall Street’s tech leaders, enthusiasm for AI investment remains strong, as new competitors emerge.

Chinese company ByteDance, owner of TikTok, recently updated its AI model, challenging OpenAI directly. In the smartphone arena, Samsung (KS:005930) unveiled its Galaxy S25, powered by Qualcomm chips and Google’s AI technology.

Upcoming Reports

Apple, Microsoft, and Meta are set to announce quarterly results this week, alongside Tesla (NASDAQ:TSLA).

Key Developments for Markets Today:

• Super Micro Computer (NASDAQ:SMCI) Q2 earnings
• 2- and 5-year U.S. Treasury auctions