28/01/2025 Daily Reports
Dollar Strengthens as Trump Pushes for Sweeping Tariffs; AI Sector Valuation Concerns Persist
- The US dollar surged against major currencies after President Donald Trump proposed “much bigger” universal tariffs to bolster domestic manufacturing, including levies on semiconductors, pharmaceuticals, and metals.
- Asian stocks mostly fell, with Japan’s tech sector hit hardest, as concerns over inflated valuations in the AI industry continued following Chinese startup DeepSeek’s release of a cost-effective AI model.
- The MSCI Asia Pacific Index slid 0.6%, while Nvidia’s stock plummeted 17% on Monday, erasing $589 billion in value.
- Emerging-market currencies, including the Thai baht and Chinese yuan, weakened amid global trade war fears.
- Meanwhile, copper and other commodity prices declined as tariffs on metals loomed.
- Investors are now turning their attention to major US tech earnings, with profit growth projected to slow, as markets grapple with heightened economic uncertainty and shifting AI industry dynamics.
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AI Stocks Rebound After Monday’s Selloff:
Nvidia Leads the Recovery
- Nvidia (NVDA) shares rebounded almost 2% in premarket trading after a sharp 17% drop on Monday.
- The selloff was triggered by Chinese startup DeepSeek’s launch of the low-cost R1 AI model, challenging the high valuations of U.S. AI stocks.
DeepSeek’s AI Disruption
- DeepSeek’s R1 model, developed using less advanced chips, introduced a new low-cost AI standard.
- Nvidia praised DeepSeek’s work as an “excellent AI advancement” and a prime example of Test Time Scaling techniques.
Chipmakers Stage Partial Recovery
- Taiwan Semiconductor Manufacturing Co. (TSM) gained 2%, recovering from Monday’s losses.
- Broadcom (AVGO) shares climbed 2.5%, while Micron Technology (MU) was up less than 1%.
- However, ASML Holding (ASML), a key semiconductor equipment maker, continued to decline, dropping 1% in premarket trading.
Energy Providers Bounce Back
- Nuclear power providers Constellation Energy (CEG) and Vistra (VST) rebounded by 2% and 3%, respectively, after Monday’s steep losses.
- These companies are seen as essential to powering AI data centers globally.
Hyperscalers Show Modest Gains
- Tech giants like Meta Platforms (META), Microsoft (MSFT), and Alphabet (GOOG), which heavily invest in AI infrastructure, gained less than 1% each.
- Amazon (AMZN) bucked the trend, falling 0.68% as other hyperscalers recovered slightly.
What’s next?
- Despite the rebound, the sharp selloff highlights investor concerns over the sustainability of high valuations in the AI sector. DeepSeek’s disruptive pricing model underscores the growing competition and potential margin pressures for established players like Nvidia.
