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28.01.2025 01:24 PM
Stock Market: S&P 500 and NASDAQ Partially Recovered After a Sharp Decline

The U.S. stock market partially rebounded after a sharp decline triggered by the Chinese startup DeepSeek, which caused many investors to question whether the AI market might be in a bubble—especially considering the valuation of a single company, NVIDIA. Notably, NVIDIA lost $600 billion in market capitalization yesterday.

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S&P 500 and NASDAQ ended the day down 2% to 3%, and today, futures for these indices are trading with minimal volatility, slightly in the red. This indicates continued uncertainty about how investors and traders will act moving forward, seemingly waiting for statements or decisions from Donald Trump's new administration.

As noted earlier, shares of the chip manufacturer fell nearly 17% as the performance of DeepSeek's language model raised questions about the volume of investments in artificial intelligence. With these developments, the high-profile name in artificial intelligence is heading for its worst day since March 2020.

Investor concerns are growing as competition in the AI space becomes increasingly fierce. The emergence of new players like DeepSeek, capable of showcasing high-performing language models, challenges the dominance of major companies. These changes are prompting a reevaluation of investment strategies and possibly even project plans. While AI investments have been at the peak of popularity for some time, yesterday's events question these established norms and create market uncertainty. For many tech companies, this is a warning sign: the AI landscape is shifting, and caution is the best defense.

NVIDIA was not the only semiconductor company whose shares plummeted due to DeepSeek's developments.

  • Broadcom dropped more than 17%.
  • Micron declined by over 11%.
  • Advanced Micro Devices (AMD) fell by more than 6%.

The VanEck Semiconductor ETF (SMH) slid nearly 10%.

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Technical Outlook for S&P500

Demand for the S&P 500 remains strong. Buyers' main goal today will be to break through the nearest resistance level at $6024, which would help sustain the upward trend and pave the way for a move toward $6038. A secondary but equally important target for bulls will be holding $6047, which would strengthen buyers' positions.

If the index moves downward amid reduced risk appetite, buyers will need to step up around $6003. A breakout below this level could quickly push the instrument back to $5986 and potentially open the door to $5967.

Jakub Novak,
Analytical expert of InstaForex
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