- Asian Stocks Drop on AI Concerns, Dollar Advances: Markets Wrap
Most Asian shares fell as concern about the potential overvaluation of artificial-intelligence companies
stretched into a second day. The dollar gained as US President Donald Trump said he wanted higher universal
tariffs. The MSCI Asia Pacific Index slipped as much as 0.6% with Japan’s largest technology firms among the
biggest losers. US equities had slumped 3% Monday as a cheap AI model from Chinese startup DeepSeek
sparked fears about lofty valuations of the global tech sector. Many Asian markets, including China, South
Korea and Taiwan are shut for the Lunar New Year holidays. The dollar strengthened against all of its Group
of-10 peers as Trump said he wanted across-the-board tariffs “much bigger” than 2.5%. He also said he would
soon put levies on foreign-produced semiconductors, pharmaceuticals and some metals to compel producers
to manufacture in the country. Scott Bessent, whom the Financial Times said backed gradual universal levies,
was confirmed as the next Treasury Secretary. There were at least some signs Asian share markets are
stabilizing. While the Nikkei 225 Stock Average slipped 1%, the broader Topix reversed its earlier decline.
Among major tech firms, Advantest Corp. tumbled as much as 11% and SoftBank Group Corp. slumped 6%.
The Hang Seng Index closed marginally higher in a shortened trading day. - S&P 500 slides, Nasdaq drops 3% in sharp AI stock sell-off spurred by China’s DeepSeek
The S&P 500 and Nasdaq Composite were down sharply Monday on concern about an artificial intelligence
stock bubble popping because of the emergence of Chinese startup DeepSeek, which has possibly made a
competitive AI model for a fraction of the billions Silicon Valley is spending. The Nasdaq Composite lost
3.07%, falling to 19,341.83, and the S&P 500 slid 1.46% to 6,012.28. The Dow Jones Industrial Average added
289.33 points, or 0.65%, to close at 44,713.58. Gains in Apple, Johnson & Johnson and Travelers helped lift
the 30-stock index. Last week, DeepSeek released R1, an open-source reasoning model that reportedly
outperformed OpenAI’s in several tests, and has climbed the charts at app stores. DeepSeek said the initial
version of its large language model, launched in late December, cost less than $6 million to design. While
Wall Street questions that figure, the startup’s claims are nonetheless raising concerns that big AI models
could be built out with much less investment. AI darling Nvidia dropped nearly 17%, Broadcom lost 17.4%,
and AMD shed 6.4%. Microsoft lost 2.1%. Palantir was hit for 4.4%. Derivative plays from the AI buildout such
as power providers also suffered. Constellation Energy lost nearly 21%, while Vistra dropped 28%. - Oil holds decline as market fixates on Donald Trump’s tariff threats
Oil steadied, after sinking by 2% on Monday, as US President Donald Trump threatened to introduce a wide
ranging set of tariffs on imports, including potentially on some key industrial commodities. West Texas
Intermediate traded above $73 a barrel, with Brent crude closing above $77. Trump said he’d impose the
tariffs on some foreign-produced goods in the “near future” in order to compel producers to manufacture
them in the country, listing products including steel, aluminum and copper. Meanwhile, Scott Bessent was
confirmed as Treasury Secretary, with the Financial Times reporting that he was in favor of universal tariffs
starting at 2.5%. In his hearing, Bessent has backed tougher curbs on Russian oil, while also saying that the US
could “make Iran poor again” through sanctions. - Gold holds steady as traders focus on Federal Reserve
Gold held steady on Tuesday as investors focused on the U.S. Federal Reserve’s policy meeting to see if
President Donald Trump’s policies have an impact on the central bank’s views. Spot gold was nearly steady at
$2,738.90 per ounce, as of 0230 GMT. Bullion prices fell more than 1% on Monday as a low-cost Chinese
artificial intelligence model triggered a sell-off in the broader market. U.S. gold futures rose 0.2% to
$2,743.10. Fed policymakers are expected to leave interest rates unchanged on Wednesday, but Trump may
complicate the job, after he said last week he wants the central bank to lower borrowing costs. If the Fed
keeps rates unchanged, this would be the first pause in the rate-cutting cycle that began last September. - BOJ Watchers Think Next Interest Rate Hike Will Be in Six Months
The Bank of Japan is likely to wait until the summer before it next raises interest rates, according to
economists surveyed by Bloomberg. Some 56% of 45 BOJ watchers expect the next hike to come in July,
according to the poll conducted Monday, following the central bank’s decision Friday to bring rates up to the
highest level since 2008. September is the second favorite timing with 18% predicting it, while 9% said it
would be in June.Governor Kazuo Ueda oversaw his third rate hike last week with a pledge to raise rates
further if the BOJ’s economic outlook is realized. The central bank is likely to pause a while before bringing
the rate up to 0.75%, the highest rate since 1995, the survey showed. - RBI Liquidity Steps Send Indian Bond Yields to a Three-Year Low
Indian bonds and stocks rallied after the central bank’s cash-infusion plan fueled hopes of an interest-rate cut
as early as next week. The Reserve Bank of India Monday evening said it will infuse $18 billion to address the
worst cash crunch in over a decade. Ample banking system liquidity is seen as a necessary condition for
smooth transmission of rate cuts when easing starts. It also brings down borrowing costs in the economy
through lower bond yields. The liquidity boost is likely aimed at supporting an economy forecast to grow at
the slowest pace in four years. The measures prompted some global banks to call for interest-rate cuts in the
Reserve Bank of India’s Feb. 7 policy meeting. Standard Chartered Plc brought forward its rate-cut call to next
week’s review from April. Citigroup Inc. and Barclays, which earlier said a rate cut was a close call, now see
Monday’s steps as a precursor to a pivot in February. - China’s Economy Stumbles in Sign Rebound Hinges on More Stimulus
China’s economic activity unexpectedly faltered to start the year, breaking the momentum of a recovery
sparked by stimulus measures and underlining the need for Beijing to do more to prevent another slowdown.
Factory activity shrank in January after three months of expansion, with the manufacturing purchasing
managers’ index falling to 49.1, the lowest since August. The non-manufacturing gauge for construction and
services dropped to 50.2, just above the 50-mark that separates growth and contraction. The disappointment
followed other official data showing the government’s fiscal support to the economy was weak last year.
Industrial firms reported the third straight year of profit declines as deflation pressure persists, even though a
program to subsidize purchases of consumer goods and machinery contributed to an earnings uptick in late 2024. Taken together, the latest set of figures reveal the world’s No. 2 economy risks stalling unless the
government stumps up more money — especially by way of public borrowing and spending — to plug a hole
in demand. - Federal Reserve expected to stand pat on rates even as Trump demands cuts
The Federal Reserve is nearly certain to keep its key interest rate unchanged at its policy meeting this week,
just a few days after President Donald Trump said he would soon demand lower rates. Fed officials, led by
Chair Jerome Powell, have cut their rate for three meetings in a row, to about 4.3%, from a two-decade high
of 5.3%. Yet with several recent economic reports showing healthy hiring and some progress on inflation,
policymakers have said that the pace of rate cuts will slow this year. Some have suggested that few
reductions are needed at all. While the two-day meeting that ends Wednesday may be uneventful, it
nevertheless kicks off what is likely to be a turbulent year for the Fed. Trump, last Thursday, made clear he
expects to comment on interest-rate policy and said, “I know interest rates much better than they do.”
Advertisement At the same time, Fed officials are also navigating a delicate period for the economy: They
want to keep borrowing costs high enough to push inflation back to their 2% target, without keeping them
too high for too long and plunging the economy into a recession. - Trump says China’s DeepSeek AI ‘should be a wake-up call’ for American tech companies
President Donald Trump said Monday that the sudden rise of Chinese AI app DeepSeek “should be a wake-up
call” for America’s tech companies, as the runaway popularity of yet another Chinese app presented new
questions for the administration and congressional leaders. Trump said that he still expected U.S. tech
companies to dominate artificial intelligence, but he acknowledged the challenge posed by DeepSeek, a low
cost AI assistant that rose to No. 1 on the Apple app store over the weekend. “The release of DeepSeek AI
from a Chinese company should be a wake-up call for our industries that we need to be laser focused on
competing,” he said while traveling in Florida. - Budget airline Ryanair cuts passenger traffic goal again on Boeing delays
Europe’s largest low-cost carrier posted after-tax profit of 149 million euros ($155.8 million) for the fiscal
third quarter, coming in comfortably above expectations. Ryanair said that while Boeing’s 737 production is
recovering from a strike at the firm in late 2024, the budget airline no longer expected the U.S. planemaker
to deliver sufficient aircraft to facilitate traffic growth to 210 million passengers across the twelve months to
March 2026. “I’d be optimistic into next year. Bookings are very strong into the summer, although it is just
too early to call where they may go,” Ryanair CFO Neil Sorahan told CNBC on Monday. - AMSL and ASM International (ASM NA) led a slide in European semiconductor stocks, with shares tied
to the artificial intelligence industry falling amid concern that AI models from Chinese firm DeepSeek could
disrupt US technological leadership
ASML dropped 7%, ASM declined 12.2%. Other stocks sliding included Siemens Energy -13.7%, Schneider
Electric -9.5%. Citigroup’s analysts including Atif Malik write: “The dominance of the US companies on the
most advanced AI models could be potentially challenged, that said, we estimate that in an inevitably more
restrictive environment, US’ access to more advanced chips is an advantage”. “Thus, we don’t expect leading
AI companies would move away from more advanced GPUs which provide more attractive $/TFLOPs at
scale”. We see the recent AI capex announcements like Stargate as a nod to the need for advanced chips.
Nirgunan Tiruchelvam, head of consumer and internet at Singapore-based Aletheia Capital: “The DeepSeek
R1 model release is deeply problematic for the thesis that the significant capital expenditure and operating
expenses that Silicon Valley has incurred is the most appropriate way to approach the AI trend”. The
premium that firms such as Nvidia are trading at is based off the strong belief that they need a lot of chip
capacity to fulfill their AI ambitions. However, if DeepSeek is really able to build an LLM on a “shoestring
budget,” that may cause investors to rethink the valuations of those US companies. - Nvidia’s plunge, fueled by investor concern about Chinese artificial-intelligence startup DeepSeek,
erased a record amount of stock-market value from the world’s largest company
Nvidia shares tumbled 17% Monday, the biggest drop since March 2020, erasing $589 billion from the
company’s market capitalization. The semiconductor maker led a broader selloff in technology stocks after
DeepSeek’s low-cost approach reignited concerns that big US companies have poured too much money into
developing artificial intelligence. The Chinese firm appears to provide a comparable performance at a fraction
of the price. The latest AI model of DeepSeek, released last week, is widely seen as competitive with those of
OpenAI and Meta Platforms Inc. The open-sourced product was founded by quant-fund chief Liang
Wenfeng and is now at the top of Apple Inc.’s App Store rankings. “Concerns have immediately emerged that
it could be a disruptor to the current AI business model, which relies on high end chips and extensive
computing power and hence energy,” Jefferies analysts said in a note to clients. Nvidia said in a statement
Monday that DeepSeek’s model is an “excellent AI advancement” and indicated that the Chinese company
didn’t violate US restrictions that limit access to advanced US chips in creating its technology. It also added
that inference, or the work of running AI models, requires “requires significant numbers of Nvidia GPUs and
high-performance networking. - Microsoft and Oracle, the well-known tech giants slid 2.1% and 13.8%, respectively, as investors
wondered if their large investments in AI data centers would pay off
Microsoft said it plans to spend $80 billion on the construction of these centers in the 2025 fiscal year, with
about half of that money directed toward projects within the U.S. Oracle is one of the backers for the AI
infrastructure project called Stargate that was announced by President Donald Trump last week. - Power companies tied to the development of AI data centers also struggled
Constellation Energy and Vistra plummeted 20.8% and 28.3%, respectively. DeepSeek may not unseat the big
American artificial-intelligence models. But the selloff could raise persistent doubts about the stocks of
energy names. If more efficient models are possible, this means data centers won’t need to consume as
much power, spelling trouble for some of the biggest winners of the AI boom. - AT&T Inc. posted fourth-quarter results that beat Wall Street projections, including better-than
expected increases in mobile-phone customers and fiber-based internet subscribers, driven by seasonal
promotions and bundled product offerings
The carrier notched revenue of $32.3 billion in the period, a 1% increase over last year and slightly ahead of
Wall Street estimates. It also reported 482,000 new monthly mobile subscribers, ahead of the 442,000
anticipated by analysts. AT&T shares rose 6.3%. AT&T said adjusted earnings totaled 54 cents a share,
unchanged from a year ago, but ahead of analysts’ estimates of 50 cents. The company added 307,000
customers to its fiber-optic internet service, ahead of analysts’ expectations for 266,000, as the business
rebounded from a strike in the third quarter. CEO John Stankey highlighted the role the company’s planned
copper network retirement will play in delivering savings later this year from legacy technology that costs $6
billion to operate annually. The carrier has received permission from the Federal Communications
Commission to substitute a wireless home phone for copper landlines in some areas, and AT&T will ask for
the regulator’s blessing in coming months to stop selling legacy products in about a fourth of its service area.
AT&T Chief Financial Officer Pascal Desroches said gains in new fiber and home wireless customers “more
than offset” losses from the waning copper landline service in the fourth quarter.
