Tech Stocks Plunge Amid AI Concerns and Trade War Tensions

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U.S. stock markets faced significant declines on Monday as fears surrounding artificial intelligence (AI) capabilities shook investor confidence. Futures for the tech-heavy Nasdaq 100 dropped by 4.3%, reflecting concerns over a Chinese startup, DeepSeek, which claims its AI assistant operates as effectively as U.S. counterparts while using cheaper chips and less data. The S&P 500 also experienced a 2.4% fall, while the Dow Jones Industrial Average futures decreased by 0.9%, approximately 380 points.

Leading chip manufacturer Nvidia suffered a notable 11% drop in pre-market trading, with other tech stocks such as ASML, Arm, Broadcom, and Micron Technology also recording significant losses. Major tech firms Meta and Microsoft saw their shares slide around 6%, as investors became increasingly skeptical about their substantial investments in AI technology.

The situation has led to a reevaluation of AI-driven growth prospects in the tech sector, especially with upcoming earnings reports from key players including Apple, Tesla, and Microsoft in the coming days. The uncertainty is compounded by revived trade tensions, specifically a recent confrontation between President Donald Trump and Colombia over a migrant deportation issue, which temporarily paused threats for 25% tariffs on Colombian goods.

As the Federal Reserve prepares for its first policy meeting of 2025, market watchers are on alert for potential conflicts between Trump's economic policy preferences and the central bank's actions regarding interest rates.

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