Wall Street Today: Tech-heavy Nasdaq down 4%, Nvidia crashes 17%; What’s behind the US stock market rout? 5 key factors | Stock Market News

Wall Street Today: US stocks dropped sharply on Monday, January 27, led by technology shares, after surging interest in Chinese startup DeepSeek’s low-cost artificial intelligence (AI) model rattled Silicon Valley. With big tech getting crushed, Wall Street was set for its worst day since the last US Federal Reserve decision that roiled trading. From New York to London and Tokyo, equities got hammered.

The S&P 500 dropped 1.7 per cent and the tech-heavy Nasdaq 100 slipped four per cent. A closely watched gauge of chipmakers plunged nine per cent. Nvidia Corp., the poster child of the AI frenzy, sank 17 per cent and headed toward the biggest market-cap loss for a single stock in market history. The AI leader wiped of $500 billion of its market value and shed 21 per cent off its stock price in two days.

Follow Live Updates: US Stock Market LIVE: Wall Street set for worst day after DeepSeek rattles Big Tech; Nvidia crashes 17%

DeepSeek’s disruption nevertheless rocked AI-related stocks worldwide, with Europe and Canada also facing the heat. DeepSeek, which overtook rival AI platform ChatGPT to become the top-rated free application on Apple’s App Store in the US, says it uses lower-cost chips and fewer data, challenging a bet in markets that AI will drive demand along a supply chain from chipmakers to data centres.

What’s driving Wall Street down today?

Here are five key factors that weigh on the US stock market sentiment:
 

1.China’s AI powerhouse DeepSeek rattles Silicon Valley

DeepSeek’s app had already hit the top of Apple’s App Store chart by early Monday morning, and analysts said such a feat would be particularly impressive given how the US government has restricted Chinese access to top AI chips. DeepSeek has claimed it took just two months and cost under $6 million to build an AI model using Nvidia’s less-advanced H800 chips. 

Also Read: Nvidia stock plummets 17%, selloff on Wall Street after low-cost Chinese AI DeepSeek

Hence, an app powered by the V3 model became the top iPhone download in the US on Monday. Investors are digesting the implications of DeepSeek’s breakthrough products offering comparable performance at seemingly a fraction of the cost — and what this means for US tech behemoths that have funnelled billions of dollars into cutting-edge AI processors.

2.Big Tech hammered

Shares of AI chip pioneer Nvidia sank 17 per cent, Microsoft fell 3.8 per cent, and TSMC’s US stock tumbled 14 per cent. Nvidia, the most valuable listed company in the US and a leading maker of the computer chips that power AI models, lost $ 500 billion in stock market value in early trading as its shares declined 17 per cent, while Google’s parent, Alphabet, declined by $80 billion. 

Prior to Monday’s open, forward earnings multiples for Nvidia Corp., Microsoft Corp., and Amazon.com Inc. swelled past 30 times, while the tech-heavy benchmark itself traded at 27 times — higher than its 10-year average, according to data compiled by Bloomberg. Meta Platforms Inc. CEO Mark Zuckerberg said he plans to invest $65 billion on AI projects in 2025, including building a giant new data center and increasing hiring in AI teams.

3.US bond yields drop to multi-week lows

US Treasury yields tumbled to multi-week lows on Monday, tracking steep declines in equities. Investors sought the safety of government bonds, with tech stocks sinking on the emergence of the Chinese discount AI model. The benchmark 10-year Treasury yield fell to a four-week low and was last down 7.1 basis points at 4.552 per cent. Both 20-year and 30-year bond yields also slid to four-week troughs. The three-, five-, and seven-year yields slid to six-week lows.

Also Read: Chip stocks tumble after China’s DeepSeek AI models raise doubts over US tech dominance

4.Stretched valuations

DeepSeek’s low-cost AI raised questions over the lofty valuation of the AI sector in the US. Valuations have remained high as analyst estimates for projected profits have risen slower than stock prices. According to Wall Street experts, any hit to the bottom lines of AI companies could quickly render these valuations untenable. Oracle also fell after the China-based startup said its DeepSeek-V3 model topped the leaderboard for open-source models.

The moves follow US President Donald Trump’s announcement last week, in which OpenAI, SoftBank Group Corp., and Oracle Corp. pledged a $100 billion joint venture called Stargate to build US data centres and AI infrastructure projects. This led to a steep stock crash of SoftBank Group Corp, which is listed on the Tokyo Stock Exchange. 

5.Risky assets sell-off

Leading cryptocurrency bitcoin slumped more than 5.7 per cent, dropping below $100,000 for the first time in a week, last trading at $99,107. Oil prices fell on Monday as the deal with Colombia reduced immediate concern over oil supply disruptions. US crude dropped 2.6 per cent to $72.72 a barrel, and Brent slipped to $76.61 per barrel, down 2.39 per cent. Gold fell 1.4 per cent to $2,733 per ounce. Crude oil prices fell on Monday as the deal with Colombia reduced immediate concern over oil supply disruptions. 

Also Read: Week Ahead: Budget 2025, US Fed Policy, Q3 Results, F&O expiry, auto sales among key market triggers for Nifty

What exactly is DeepSeek?

DeepSeek was founded in 2023 by Liang Wenfeng, chief of AI-driven quant hedge fund High-Flyer. It develops open-source AI models, meaning the developer community can inspect and improve the software. Its mobile app surged to the top of the iPhone download charts in the US after its release in early January.

The app distinguishes itself from other chatbots like OpenAI’s ChatGPT by articulating its reasoning before responding to a prompt. The company claims its R1 release offers performance on par with OpenAI’s latest and has granted licenses for individuals interested in developing chatbots using the technology to build on it.