- The Dow Jones tumbled during the overnight session before Monday’s opening bell.
- Trade war fears are back on the table after Trump gets into a political scuffle with Colombia.
- Fresh rate cut hopes are bolstering equities from early week lows.
The Dow Jones Industrial Average (DJIA) dipped into the 44,000 handle during Monday’s early overnight session, driven lower by a fresh bout of souring in investor risk appetite after a Chinese company globally released an open-source competitor to US-based AI models that have been largely proprietary up to this point. Investor sentiment was driven further into the floorboards by a political spat between United States (US) President Donald Trump and Colombia over the weekend after a disagreement between the two countries over the return of Colombian migrants from the US led to President Trump losing his cool and threatening a 50% tariff on all goods imported into the US from Colombia.
Equities rallied in the early hours of the US market session as investor focus pivoted to rate cut hopes from the Federal Reserve (Fed). The Fed is due to deliver its latest rate call later this week, and although the US central bank is broadly expected to stand pat on rates for the time being, traders are ramping up their bets of further rate cuts in 2025. According to the CME’s FedWatch Tool, rate markets are pricing in a full 50 bps of rate trims through the rest of the year, up from last week’s bets of 25 bps.
The tech sector got rattled after a Chinese artificial intelligence lab released their DeepSeek-R1 AI model, making it open source and proving that anybody can develop a heavy-hitter AI model without heavy investment in expensive US-produced silicon and microchips, something that US trade barriers were explicitly instituted to keep out of the hands of the Chinese. With DeepSeek making waves in the AI space, investors are questioning the point of keeping up silicon trade barriers with China and investors who have bought into US-based tech companies providing chip solutions for AI projects are getting nervous.
Dow Jones news
Despite struggling to pare losses and return to Friday’s closing bids, most of the Dow Jones’ listed securities are on the rise during Monday’s US trading session. However, losses are largely contained within key tech darlings, keeping the DJIA off-kilter. Nvidia (NVDA) is taking it on the chin on Monday, down around 15% on the day and trading toward $120 per share with the silicon-puncher’s dominance in the AI space getting threatened by spunky Chinese upstart DeepSeek hinting that Nvidia’s market dominance may not last forever, or even for the rest of the year.
Dow Jones price forecast
The Dow Jones kicked off the new trading week with a fresh test of the 44,000 handle, but the index’s early pivot into the bearish side is facing a fresh upshot from bidders, and it has climbed back into range of 44,400. Despite near-term declines, the major equity index is still tilted firmly toward the bullish side, closing in the green for all but two of the last ten consecutive trading days.
The Dow Jones is still trading on the wrong side of record highs above 45,000 posted last November. Still, equity traders are pushing stocks back up the same old hill as the DJIA climbs from the last major swing low into the 41,700 region.
Dow Jones daily chart
AI stocks FAQs
First and foremost, artificial intelligence is an academic discipline that seeks to recreate the cognitive functions, logical understanding, perceptions and pattern recognition of humans in machines. Often abbreviated as AI, artificial intelligence has a number of sub-fields including artificial neural networks, machine learning or predictive analytics, symbolic reasoning, deep learning, natural language processing, speech recognition, image recognition and expert systems. The end goal of the entire field is the creation of artificial general intelligence or AGI. This means producing a machine that can solve arbitrary problems that it has not been trained to solve.
There are a number of different use cases for artificial intelligence. The most well-known of them are generative AI platforms that use training on large language models (LLMs) to answer text-based queries. These include ChatGPT and Google’s Bard platform. Midjourney is a program that generates original images based on user-created text. Other forms of AI utilize probabilistic techniques to determine a quality or perception of an entity, like Upstart’s lending platform, which uses an AI-enhanced credit rating system to determine credit worthiness of applicants by scouring the internet for data related to their career, wealth profile and relationships. Other types of AI use large databases from scientific studies to generate new ideas for possible pharmaceuticals to be tested in laboratories. YouTube, Spotify, Facebook and other content aggregators use AI applications to suggest personalized content to users by collecting and organizing data on their viewing habits.
Nvidia (NVDA) is a semiconductor company that builds both the AI-focused computer chips and some of the platforms that AI engineers use to build their applications. Many proponents view Nvidia as the pick-and-shovel play for the AI revolution since it builds the tools needed to carry out further applications of artificial intelligence. Palantir Technologies (PLTR) is a “big data” analytics company. It has large contracts with the US intelligence community, which uses its Gotham platform to sift through data and determine intelligence leads and inform on pattern recognition. Its Foundry product is used by major corporations to track employee and customer data for use in predictive analytics and discovering anomalies. Microsoft (MSFT) has a large stake in ChatGPT creator OpenAI, the latter of which has not gone public. Microsoft has integrated OpenAI’s technology with its Bing search engine.
Following the introduction of ChatGPT to the general public in late 2022, many stocks associated with AI began to rally. Nvidia for instance advanced well over 200% in the six months following the release. Immediately, pundits on Wall Street began to wonder whether the market was being consumed by another tech bubble. Famous investor Stanley Druckenmiller, who has held major investments in both Palantir and Nvidia, said that bubbles never last just six months. He said that if the excitement over AI did become a bubble, then the extreme valuations would last at least two and a half years or long like the DotCom bubble in the late 1990s. At the midpoint of 2023, the best guess is that the market is not in a bubble, at least for now. Yes, Nvidia traded at 27 times forward sales at that time, but analysts were predicting extremely high revenue growth for years to come. At the height of the DotCom bubble, the NASDAQ 100 traded for 60 times earnings, but in mid-2023 the index traded at 25 times earnings.