Weekly Market Update 31/01/2025

Nvidia experienced the largest ever one-day drop in market capitalisation of a US company on Monday as DeepSeek, a Chinese AI start-up, revealed its latest AI model achieved comparable performance to US based OpenAI, but by using far less computing power and fewer Nvidia chips. The chipmaker dropped almost 17%, equating to a nearly $600bn decrease in market value. Microsoft fell 2.1%, the tech-heavy Nasdaq declined 3.1% and the S&P500 dropped 1.5%. However, Apple gained 3.3% as it is viewed as being less exposed to the AI race.

The stock market panic subsided on Tuesday, as Nvidia rebounded 9% following the previous day’s historic loss, helping the Nasdaq rise 2% and the S&P500 increase 0.9%. Netherlands-based ASML had also been caught up in the drama, having opened 7% lower on Monday following the news from DeepSeek over the weekend. However, following the calming of tech stocks and the release of pleasing results on Wednesday which blew away analyst expectations, ASML has regained all the ground it lost.

Microsoft, Meta, and Tesla all also released results this week. Microsoft fell 6% on Thursday as results disappointed and fell below analyst expectations, particularly in its cloud unit as it struggled to keep pace with demand for AI-related services. Meta shares were up 1.9% in pre-trading on Thursday as they beat analyst revenue expectations and reported a 50% jump in net income to $20.8bn. They also doubled down on their investment in AI, brushing off concerns about DeepSeek. Tesla reported a disappointing end to 2024 as both profit and revenue missed estimates and the company had its first month of declining car sales in a decade, but Elon Musk pledged a rebound in the share price this year off the back of leaps forward in their AI technology which will see self-driving cars on roads by June. Tesla shares moved around, initially falling 4% in after-hours trading, then reversing to 4% up in Thursday pre-trading.

Andrea Wood, Chartered MCSI
Investment Manager