Nvidia – record loss after AI surprise from China

Current market commentary

Just as Trump announced investments in AI infrastructure totalling USD 500bn dubbed ‘Stargate’, the Chinese start-up DeepSeek took the lead in AI research with a fraction of the funding and caused the expensive tech sector to tremble. Chip manufacturer NVIDIA recorded the biggest one-day loss in history at almost USD 600bn. Despite this, the S&P 500 remained robust - consumer staples, healthcare and banks were among the relative winners. The European equity markets have so far only known one direction: upwards. Lower positioning, lower valuations and hopes of political change have fuelled the rally. However, the just-announced tariffs are likely to lead to profit-taking. With Trump's erratic policies, the ongoing reporting season and the US Treasury's Quarterly Refunding Announcement, volatility is likely to remain elevated. We reduced our equity overweight to neutral last week.

Short-term outlook

The Q4 reporting season is in full swing – of the S&P 500 companies that have reported so far (around 33%), almost 79% have beaten earnings expectations. A further 42% of S&P 500 companies will report over the next two weeks, while the Bank of England meets on Thursday. Today sees the release of the eurozone's preliminary CPI (Jan.) and the US manufacturing PMI (Jan.), followed by the US ADP employment report (Jan.) and the US services PMI on Tuesday. Eurozone Retail Sales (Dec.) will follow on Thursday, before US Non-Farm Payrolls (Jan.) are released on Friday. The following week will bring preliminary GDP (Q4) for the UK and the Eurozone, German CPI (Jan.), US Retail Sales (Jan.) and the preliminary Michigan Consumer Sentiment Index (Feb.).