US futures

Dow future -0.8% at 44056

S&P futures -2.1% at 5968

Nasdaq futures -3.5% at 21007

In Europe

FTSE -0.11% at 8484

Dax  -0.76% at 21411

DeepSeek’s AI model raises questions over huge AI investments

The US & Colombia pull back from the brink of a trade war

Fed rate decision & core PCE data are due this week

Oil falls on trade uncertainty, weaker Chinese data

Tech stocks plunge, wiping off $1 trillion

The U.S. is set for a steeply lower open, with tech stocks leading the charge lower as Chineses startup DeepSeek triggers a $1 trillion tech selloff, and AI darling Nvidia is on track for its steepest decline in history.

DeepSeek’s cheaper, more efficient open-source AI model, R1, has raised serious questions about the need for billions to be spent on chips and other AI infrastructure. The new model shows that AI models could be run on less advanced and few Nvidia chips at around 1/30^th of the cost and potentially perform to the same standard, if not better.

This latest development comes as tech giants have committed billions in investment spending this year. Just on Friday, Meta announced that it had $65 billion committed to AI investment spending, and Microsoft had around $80 billion. Concerns over the return on investment were already high, but DeepSeek’s model has underscored these worries and raised doubts over whether the US can maintain its lead in AI.

DeepSeek's AI assistant overtook Chat GPT to become the top free app on the Apple App Store.

The selloff is extending well beyond traditional tech names. Power companies, which were expected to receive a huge boost in demand from data centers, are also under pressure.

Meanwhile, risk sentiment is also on edge as the US and Colombia pulled back from the brink of a trade war.

The economic calendar is quiet today. Attention will be on the Federal Reserve rate decision on Wednesday and the core PCE inflation report on Friday.

Corporate news

Nvidia stock slumped 12%, with the AI darling hit by concerns that less investment in AI infrastructure could be needed. Other chip stocks are also falling, with AMD -4% and Microsoft falling 4%.

Tesla trades 4% lower ahead of earnings on Wednesday as they await more information on the EV maker's lower-priced model, which could help it increase deliveries this year.

Coinbase is falling on the open after the digital exchange tracks Bitcoin’s price lower. BTC trades below 100k.

Nasdaq 100 forecast – technical analysis.

The Nasdaq 100 broke out of the falling wedge pattern and hit resistance at 21,950. The price rebounded lower, taking out the 50 SMA before finding support once again at 20,700. Sellers will need to take out this horizontal support and the 100 SMA to create a lower low, opening the door to 20k and the 200 SMA at 19,850. While the price remains above 20,700, the Nasdaq is in neutral territory. Buyers will need to rise above 21,950 to create a higher high and bring 22,100, the record peak, into play.

FX markets – USD falls, EUR/USD rises

USD is falling, extending losses from last week as Trump adopts a less aggressive approach to trade tariffs than the market had feared. As a result, Fed rate cuts could be back on the table. USD fell 1.7% last week and is down a further 0.3% at the start of this week.

EUR/USD is Rising amid a weaker U.S. dollar as Trump tariff fears com and after the German Ifo business climate index unexpectedly improved in January to 85.1, up from 84.7. Forecasts had been for a full 285.4. However, despite the rise, the indicator doesn't signal any imminent economic rebound. The ECB is expected to cut interest rates when it meets later this week.

USD/JPY is falling as the yen outperforms its peers on safe-haven flows amid a sell-off in the equity markets. On Friday, the Bank of Japan also hiked interest rates by 25 basis points to 0.5%, marking the highest interest rate in 17 years.

Oil falls after Colombia tensions & weak Chinese data

After falling over 4% last week, oil prices extended their losses on Monday as the market mood remains cautious despite the US withdrawing from initial sanctions against Colombia.

The US quickly reversed plans to impose sanctions on tariffs on Colombia after the latter agreed to accept deported migrants from the US.  In 2024 Colombia exported around 40% of its seaborne crude exports to the US.

Meanwhile, weaker-than-expected Chinese manufacturing activity also keeps oil prices under pressure.

Chinese manufacturing PMI fell to 49.1 in January, defining expectations of 50.1, putting it back in contraction territory after three months of growth.

This week, attention will remain on Trump after he pledged to increase oil and gas output in the US and called for APEC to reduce oil prices at the end of last week.