Global chip stocks slumped Monday after Chinese artificial-intelligence company DeepSeek said it had developed AI models that nearly matched American rivals despite using inferior chips, raising questions about the need to spend huge sums on advanced gear provided by Nvidia and other tech giants to train AI models. DeepSeek said last week that the performance of its latest R1 model was on par with OpenAI's o1-mini model that the ChatGPT maker released in September. The announcement came after DeepSeek said in a late-December report that it used a cluster of more than 2,000 Nvidia chips to train its other V3 model, compared with the tens of thousands of chips that are normally used for training models of a similar size. The company said training one of its latest models cost $5.6 million, compared with the $100 million to $1 billion range cited last year by Dario Amodei, chief executive of AI company Anthropic. DeepSeek's models, both in the top 10 on popular ranking platform Chatbot Arena, sparked a Monday selloff led by chip stocks amid concerns that lower costs to run the models could undermine demand for increasingly sophisticated semiconductors. News that a little-known Chinese upstart had apparently achieved an AI breakthrough on the cheap pulled the rug from under companies benefiting from AI's rise, including above mentioned chip makers, infrastructure suppliers and power stocks. Many suffered double-digit losses. Oracle tumbled 14%. Super Micro Computer, which makes servers used for generative AI, slid 13%. Chip maker Broadcom slumped 17%.

At the beginning of the week, the Swiss stock market ended trading with a substantial performance. The SMI rose by 1.1 per cent to 12,417 points. Among the 20 SMI stocks, there were 15 price gainers and five price losers. A total of 25.56 (previously: 20.69) million shares were traded. The shares of Nestlé, Roche and Novartis were among the biggest winners in the SMI with gains of up to 3.9 per cent. Roche and Novartis will present their financial figures for 2024 later in the week. Givaudan shares were the day's winners, rising by 5.7 per cent. Shares in SGS jumped 4.7 per cent. The testing, inspection and certification company and Bureau Veritas have ended their talks about a possible merger. The companies announced that the negotiations had not led to an agreement. Vontobel analysts believe that in a standalone scenario, an attractive shareholder value could be unlocked by implementing SGS's Strategy 2027 rather than going through a lengthy and costly merger integration process. The implementation of Strategy 2027, focussing on organic growth, targeted M&A activities and operational efficiency, is well on track.

Europe
The European stock markets retreated on Monday, against a backdrop of announcements by Chinese start-up DeepSeek concerning generic artificial intelligence (AI). The Stoxx Europe 600 index shed 0.1% to 529.7 points. The CAC 40 and SBF 120 lost 0.3% and 0.2% respectively. The DAX 40 dropped 0.5% in Frankfurt, while the FTSE 100 finished flat in London. SEMI-CONDUCTORS: Dutch manufacturers ASML (-7% in Amsterdam), ASM International (-12.2%) and BE Semiconductor (-8.2%), as well as suppliers to the sector VAT Group (-5.3% in Zurich) and SUSS MicroTec (-9.1% in Frankfurt) declined after announcements by the Chinese company DeepSeek. SCHNEIDER ELECTRIC (-9.5%) and SIEMENS ENERGY (-20%) also tumbled. Both shares had risen last week following President Trump's Stargate project to invest in AI. BUREAU VERITAS (-1.5%) announced on Monday that merger talks with its Swiss rival SGS (+4.7% in Zurich) had ended. RYANAIR (+3.2% in Dublin) reported a rise in profits in the third quarter of its 2024-2025 financial year, driven by an increase in passenger numbers and average fares. Ryanair has, however, reduced its traffic growth forecast for the next financial year due to Boeing delivery delays.

United States
Technology stocks tumbled Monday on news that China's DeepSeek had trained a sophisticated artificial-intelligence model at a fraction of the cost of its Silicon Valley rivals, triggering a sudden reversal of the recent AI rally. The technology-heavy Nasdaq Composite slid 3.1%. The S&P 500 sank 1.5% after reaching a record last week. The Dow Jones Industrial Average, which is less weighted toward Big Tech, gained 0.7% for the day. Nvidia, whose chips have been used to power many of the leading AI models, sank 17%. The move wiped out $589 billion from the company's market value and tarnished one of the stock market's brightest stars. Monday's drop was a sudden reversal for a market that has been trading near record highs since the election of President Trump, as investors have bet on pro-business policies from the new administration and enjoyed the rally in stocks linked to AI. In all, Monday's market bloodbath wiped out some $1 trillion from the stock market's value, according to Dow Jones Market Data. Casualties of the selloff extended to the energy sector, including electricity generators whose shares had rallied on expectations of surging demand from data centers serving the AI revolution. Constellation Energy shares dropped 21%. Bitcoin fell, briefly dipping below the $100,000 mark it breached after Trump's election, before rebounding. It was trading at about $101,670 as of 4 p.m. ET.

Asia
After a start to the week dominated by the headlines surrounding DeepSeek, resulting in some sharp falls in AI-fantasy stocks, the Tokyo stock exchange dropped a little further on Tuesday, especially as the reaction on Wall Street now has to be digested. There, the technology-heavy Nasdaq indices fell by up to 3.1 per cent. The Nikkei 225 index lost a further 1.4 per cent to 38,994 points. In Shanghai and South Korea, trading was paused due to the respective New Year celebrations. In Hong Kong, trading was shortened due to the festivities. The HSI closed up 0.1 per cent. Shares from the chip and AI sector remained under heavy pressure in Tokyo after DeepSeek apparently found a way to offer artificial intelligence much more cheaply than OpenAI in the US, for example. Advantest plunged by a further 11.7 per cent and Tokyo Electron slumped by 5.3 per cent. Softbank Group slipped another 5.7 per cent.

Bonds
A flight-to-perceived-safety move was driving U.S. Treasury yields lower on Monday, with U.S. stocks tumbling at the open after a Chinese AI startup raised questions over valuations of dominant technology companies. The 10-year Treasury note yield edged down 10 basis points to 4.53%. The 2-year Treasury note yield also declined by 8 basis points to 4.2%.

Analysis
JP Morgan upgrades Givaudan to Overweight (Neutral)/CHF 4,400 (4,200) - Trader
Target price Zurich Insurance: HSBC raises to CHF 560 (556) - Hold
Target price Barry Callebaut: Julius Baer downgrades to CHF 1100 (1550) - Hold

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