π Market Report.
π Advantest’s shares, a supplier to Nvidia, dropped 11%, bringing the two-day decline to about 20%. This week has seen a similar decline for Furukawa Electric, a company that tripled in value last year and manufactures data centre optic fibres.
π The same pattern played out in the U.S., with tech giants like Broadcom, Microsoft, and Alphabet also experiencing steep declines. Shares of Nvidia, the poster child of the AI boom, dragged U.S. stocks lower, sinking 17% on Monday and wiping $593 billion from the chipmaker’s market value.
π This week we have results from several of these tech giants in the US, so the numbers presented would take on extra importance.
πͺπΊ The absence of a strong technology weight in European stock markets, which was seen as a weakness in the face of the innovative US technology sector, has been precisely the factor that has made the European stock markets less affected.
ποΈ Yesterday, during a media interview, we said that at ATFX, we believe that these falls will put pressure on the Fed to loosen up and facilitate further rate cuts on Wall Street. Meanwhile, Europe is almost certain to slash interest rates on Thursday.
π€ DeepSeek claims it took just two months and under $6 million to build an AI model using Nvidia’s less-advanced H800 chips, which became the top iPhone download in the U.S. on Monday. DeepSeek’s AI models are said to either match or outperform top U.S. rivals at a fraction of the cost, challenging the view that scaling AI requires vast computing power and investment.
π‘ This should be good news, a technological breakthrough that optimises production. The problem is that it manifests two things: the optimisation comes from the Chinese side, which is an advantage over the US and Wall Street. And secondly, it calls into question the very high cost of US investment in this technology. It is estimated that American tech companies have spent more than $250 billion on AI this year.
π¨π³ It also renders US sanctions against technology exports to China useless. DeepSeek has achieved this with low performance chips! What would they do if you also had the latest Nvidia hardware?
π° DeepSeek’s pricing, which is up to 40 times lower than comparable models from OpenAI, could initiate a price war for AI services and potentially pressure tech companies already losing billions on AI operations.
π£οΈ Donald Trump criticised the Biden administration’s regulations on artificial intelligence, highlighting DeepSeek’s ability to produce cheaply. He praised the company’s innovation as a positive example for US industries to improve quality and efficiency. Trump emphasized the need for smarter solutions rather than unnecessary spending to strengthen the country’s competitiveness, rather than unnecessary spending on unnecessarily expensive solutions.
π¨π Swiss National Bank (SNB) Chairman Martin Schlegel acknowledges the possibility of implementing negative interest rates if necessary, stating that they are effective when used before. However, Schlegel would only return to this policy if it was “really necessary.” Markets suggest a 64% chance the SNB will cut borrowing costs to 0.25% in March, with a 27% likelihood of reaching 0% after June’s decision. The SNB’s cautious stance on negative interest rates aims to maintain price stability in the Swiss economy.
βοΈ Tesla and BMW have sued the European Union’s executive, adding to a flurry of cases by Chinese carmakers attacking tariffs of up to 45% on imports of electric vehicles into the EU. Elon Musk’s lawsuit against the EU adds to tensions between the world’s richest man and European politicians over issues like content moderation on his X platform. BMW stated that the EU duties on battery electric vehicles “do not strengthen the competitiveness of European manufacturers” and “harm the business model of globally active companies.” Let’s face it, these are European companies suing European authorities for harming European businesses with regulation that impedes their growth. BMW’s imports were hit with a 20.7% duty, while MG’s state-owned parent SAIC was hit hardest with tariffs totaling 45%, contributing to a 58% drop in its European registrations in November.
β‘οΈ Market View:
π» Sharp market declines on the disruptive effect of Chinese technology in the artificial intelligence sector.
π Global stock markets have recorded significant declines, hit by the impact of a Chinese company that is revolutionising the artificial intelligence sector. The S&P 500 has retreated almost 3.5% from Friday’s highs, with Mini S&P futures currently trading at 6,040 points.
π In the case of the Nasdaq 100, composed mainly of technology companies, declines reached nearly 6% before a rebound to nearly 1,000 points higher, currently trading at 21,300 points.
π΅ Despite this turbulence, the dollar index (DXY) has regained ground, again approaching 108 points, with a current value of 107.85 points. This has caused a pullback in the EUR/USD, which after breaking above the 1.0530 level yesterday, has fallen back below 1.05, currently trading at 1.0435.
πͺπΊ In Europe, stock markets also recorded losses, although their more moderate exposure to the technology sector allowed them to withstand the declines somewhat better. The German DAX lost nearly 2% from Friday’s highs, but managed to recover and is now trading around 21,500 points.
π’οΈ In the commodities market, Brent crude oil hit a new low yesterday, falling below $76.50 per barrel. However, in the last few hours it has shown a slight recovery, standing at 77.65 dollars per barrel.
π₯ Gold also suffered setbacks, falling below 2,750 dollars, and is currently trading at 2,745 dollars.
βΏ Finally, Bitcoin, known for its ability to anticipate Wall Street movements, began to fall on Sunday, anticipating what was to come in the traditional markets. However, it has managed to recover and is now trading above $103,000, showing signs of resilience in the face of global uncertainty.
π Geopolitics:
πΈπ° Slovak Prime Minister Robert Fico wants to amend the country’s constitution to recognise only two genders and limit gender changes to serious reasons. He also intends to make adoption only for heterosexual couples. Fico described βprogressivismβ as βnonsenseβ and said it’s time to put an end to people βwaking up and saying they’re no longer a man or a woman.β This, which a priori reminds us of Trump’s words last week, is once again labelled pro-Russian by the Western press. Conservative thinking seems to come from Moscow according to them. This is the man who was shot several times by a fanatic for opposing the war in Ukraine. Again, like Trump.
πΊπ¦ The Ministry of Foreign Affairs of Ukraine has criticized the presidential elections in Belarus, labeling them illegitimate. Citing the lack of fairness, transparency, and democratic standards. However, this comes from a country that suspended elections in 2024. Since then, the current Ukrainian government has remained in power without consulting the Ukrainian people. The former president of the European Commission, Jean-Claude Juncker, has repeatedly denounced the high level of corruption in Ukraine.