(Bloomberg) — Asian traders were bracing for a turbulent Tuesday, following a bruising session on Wall Street as cracks appeared in the artificial intelligence sector that’s been powering the bull market.
Most Read from Bloomberg
A selloff was triggered after a cheap AI model from Chinese startup DeepSeek climbed to the top of Apple’s appstore, sparking concerns that valuations of the technology could be tough to justify. The S&P 500 dropped 1.5% and the Nasdaq 100 sank 3%. A closely watched gauge of chipmakers plunged the most since March 2020. Nvidia Corp., the poster child of the AI frenzy, sank 17% in the biggest market-cap loss for a single stock in market history.
US equity futures were steady early Tuesday. While Chinese markets are closed for the rest of this week, contracts show Tokyo equities could slump more than 1%, as Sydney stocks opened slightly lower. Most Asian markets were preparing for the Lunar New Year celebrations, with Indonesia, South Korea, Taiwan and Vietnam also shut Tuesday. Bourses in Hong Kong — on track to open higher — and Singapore are due to close early.
Treasuries rallied on Monday, driving yields to the lowest levels this year. Haven currencies including the yen and the Swiss franc climbed, while the crypto world came under pressure. Australia’s 10-year yield fell six basis points in early Asia trading Tuesday.
“What was shaping up to be a big week in the markets got even bigger with the disruption in the AI space,” said Chris Larkin at E*Trade from Morgan Stanley. “That could make this week’s megacap tech earnings even more critical to market sentiment.”
The US Senate also confirmed Scott Bessent as the next secretary of the Treasury, becoming the chief economic spokesman for President Donald Trump and his sweeping agenda of tax cuts, deregulation and trade rebalancing.
Monday’s AI plunge drove new fissures into a market narrative that prevailed since the re-election of Donald Trump in November, the America-first, tech-fueled uber bullishness that saw a clear upward path for risky assets spurred by deregulation, tax cuts and even government sponsorship of AI investment. Treasury yields slid sharply as haven-seeking investors laid aside concern – for today, anyway – that the new president’s policies will stoke inflation.
