US pre-open: Futures sharply lower on Chinese AI news

(Sharecast News) - Wall Street futures were sharply lower ahead of the bell on Monday amid concerns that the artificial intelligence bubble may be about to pop. As of 1245 GMT, Dow Jones futures were down 0.86%, while S&P 500 and Nasdaq-100 futures had the indices opening 2.27% and 3.88% lower, respectively.

The Dow closed 140.82 points lower on Friday as investors reacted to data showing that private sector growth slowed to a nine-month low.

Futures were sharply lower early on Monday after Chinese startup DeepSeek's open-source AI model reportedly outperformed OpenAI's in several for what it said cost less than $6.0m. As a result of the news, AI darling Nvidia was down 12% in pre-market, while Broadcom shed 13% and AMD was down 6%. Other mega-cap tech stocks like Amazon and Meta Platfobrms were also trading lower prior to the open.

Trade Nation's David Morrison said: "US stock index futures have tumbled overnight. Investors rushed to bail out of chipmakers and tech-related equities in reaction to China's threat to US dominance over the development of generative AI. A relatively small Chinese company called DeepSeek has produced a powerful open-source artificial intelligence model at a fraction of the cost, yet with capabilities equal or better than, many US versions such as ChatGPT. The DeepSeek version is already the top-rated free application on Apple's US App. The threat has led to a sudden, and painful, reconsideration of tech stock valuations along with their plans for future capital expenditures."

Elsewhere in the corporate space, Meta Technologies, Microsoft, Tesla and Apple will all report quarterly earnings before the end of the week.

On the macro front, last month's Chicago Fed national activity index will be released at 1330 GMT, while December new home sales will follow at 1500 GMT.

Later in the week, the Federal Open Markets Committee will hold its first two-day policy meeting of 2025 on Tuesday, with the central bank set to make its interest rate decision on Wednesday. Economists expect the Fed to leave interest rates unchanged.

Reporting by Iain Gilbert at Sharecast.com