DAX: US Futures and China AI Model Shake Global Markets
US futures drop sharply on advances from cheap Chinese AI model and the spinoff leads the DAX lower.
- NAS100 drops 3.73%
- China AI model DeepSeek shows lower demand for power and chips
- DAX follows suits as ECB rate cuts discounted
The DAX opened down 1.12% this morning following the selloff in US stock futures, where the hardest hit is the NAS100 losing 3.73% today.
DeepSeek Surpasses Downloads of ChatGPT on the Apple App Store
China unleashed a new generative AI called DeepSeek, which uses less power and lower cost chips. The whole scenario puts into doubt the current levels and projections of demand for chips.
The use of low-cost technology that can perform at the same levels as the most sophisticated AI has cast doubts on the whole sector. The need for chips and infrastructure may have been overestimated.
DAX Live Chart
DAX Takes a Tumble
The DAX opened lower again today and the bear trend seems to have taken control after 8 positive trading sessions. Friday’s close was down 0.59% but was seen as profit taking after a very bullish week.
The AI hardware infrastructure company Siemens Energy tumbled 17.7% this morning. While the CAC Shneider Electric lost 8.1%. The DAX has had a very bullish run posting new all-time highs and outperforming its peers.
The pressure is now on as the market needs to find reasons to continue supporting high valuations.
The ECB Meeting Already Priced In
The ECB meeting is widely expected to lead to another rate cut of 0.25%. More importantly, the market has already been priced in 4 rate cuts for 2025. The forecast is for the main ECB rate to fall as low as 2%.
Various ECB officials have already stated that they see the market view on interest rate cuts as correct.
But the dilemma is whether it will be enough to turn the economy around. The German economy has been showing signs of weakness. Yet the DAX has continued to plunge to new highs.
Across the pond US stocks have been less bullish as the market ponders the risks going into 2025.
