The emergence of a Chinese artificial intelligence startup, DeepSeek, has sent shockwaves through U.S. markets, prompting President Donald Trump to call for heightened awareness among American industries. On Monday, DeepSeek unveiled a competitive and affordable open-source AI model, which triggered market unrest and fueled concerns over the sustainability of massive tech spending by U.S. companies. As a result, Nvidia's stock plummeted by 17%, marking the largest single-day market cap loss in U.S. history at nearly $600 billion.
The Nasdaq Composite bore the brunt of the market turbulence, falling over 3%, while the S&P 500 experienced a 1.5% decline. Analysts have expressed concerns that the advent of DeepSeek's AI model could signal excessive investments by U.S. tech giants in creating competitive AI models.
"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." – Donald Trump
In this climate of uncertainty, analyst Kristen Owen from Oppenheimer upgraded CNH Industrial's rating to "outperform" from "perform," anticipating a recovery in the industrial data sector alongside improving macroeconomic conditions. CNH's shares have surged over 16% this year, reversing a 7% decline in 2024.
Meanwhile, the Federal Reserve is set to commence its two-day policy meeting on Tuesday. This meeting comes amid fresh data from the Commerce Department indicating an unexpected drop in orders for long-lasting goods such as automobiles, appliances, and computers in December.
The aerospace giant Boeing also reported disappointing financial results, with an adjusted loss of $5.90 per share compared to analysts' expectations of a $3 loss. Boeing's fourth-quarter revenue fell short of estimates as well, coming in at $15.24 billion versus the expected $16.21 billion.
Analyst Joseph Moore has adjusted Nvidia's price target downward, reducing it from $166 to $152, which still suggests a potential upside of 28.3% from Monday's closing price. Moore further lowered his target price for Nvidia to $91 per share, down from $98.
"Valuations remain extended, and while vulnerabilities were expected this year, developments like DeepSeek highlight the need for diversification beyond the Mag Seven." – Seema Shah, chief global strategist at Principal Asset Management
Shares of other firms with significant exposure to AI technologies, such as Broadcom and Oracle, saw modest gains exceeding 2%. This movement underscores a broader industry trend towards diversification in response to emerging global challenges.
The U.S. Senate confirmed Scott Bessent as Treasury Secretary in President Trump's administration on Monday. Bessent is advocating for a gradual imposition of a 2.5% universal U.S. tariffs plan, according to a report by the Financial Times.
"The 2025 theme of US exceptionalism is now facing uncertainty, with ongoing concerns around tariffs and inflation adding to market challenges." – Seema Shah, chief global strategist at Principal Asset Management
In the face of these developments, some analysts maintain optimism about certain sectors. Mizuho analyst Siti Panigrahi noted positive signs of recovery in industry data and reinforced a favorable outlook on ADSK fundamentals amid a resilient business momentum and improving macro trends.
"Signs of recovery in industry data, positive channel checks and improving macro trends further reinforce our positive outlook on ADSK fundamentals." – Siti Panigrahi, analyst at Mizuho
"The resilient business momentum amid improving macro trends and industry challenges are encouraging." – Siti Panigrahi, analyst at Mizuho
Kristen Owen of Oppenheimer also projected that CNH Industrial is nearing its lowest earnings per share (EPS) point by 2025, given the ongoing decline in equipment sales.
"Now into the second year of equipment sales declines, we believe CNH is approaching trough EPS in 2025." – Kristen Owen, analyst at Oppenheimer