Five Charts Flashing Red Amid DeepSeek Selloff

The recent DeepSeek selloff has sent shockwaves through the tech sector, with investors scrambling to make sense of the market's reaction. As the dust settles, several market signals are flashing red, indicating potential risks and opportunities for investors. Let's dive into five key charts that highlight these signals.



1. Tech Stocks in Free Fall
The tech-heavy Nasdaq Composite Index plummeted over 3% on Monday, with Nvidia leading the decline, dropping nearly 17% and losing a record $593 billion in market value. Other AI-related stocks, such as Broadcom, Microsoft, and Google, also tumbled significantly.



2. Semiconductor Index Plunges
The Philadelphia semiconductor index tumbled 9.2%, its biggest percentage drop since March 2020. Marvell Technology, a key player in AI chips, tumbled 19.1%. This selloff reflects investors' concerns about the demand for AI chips in the wake of DeepSeek's emergence.

3. Investor Sentiment Shifts
The CBOE Volatility Index (VIX), which measures expected volatility in the S&P 500, spiked out of nowhere twice in the last six months. This fragility in market sentiment suggests that investors are increasingly nervous about the potential impact of DeepSeek on the AI market.

4. Safe-Haven Assets Gain Favor
As tech stocks tumble, investors are rushing to safe-haven assets, such as Japan's yen and European credit. Bank of America data shows that money has flowed into European credit funds for 23 consecutive weeks. This shift in investor sentiment indicates a growing preference for lower-risk assets.



5. Dollar Wobbles Amid Market Uncertainty
Traders have doubled the size of their bets that the dollar will rise since the Nov. 5 U.S. election. However, this positioning is predicated on the Fed cutting rates more slowly than elsewhere, and any change to that scenario could be problematic for the U.S. currency. The dollar's strength or weakness can significantly impact various asset classes, including currencies, commodities, and fixed-income securities.

In conclusion, the recent DeepSeek selloff has triggered several market signals that investors should be aware of. Tech stocks and semiconductors are under pressure, investor sentiment is fragile, safe-haven assets are gaining favor, and the dollar's strength is being tested. As the market navigates this uncertainty, investors should stay informed and adapt their portfolios accordingly to capitalize on potential opportunities and mitigate risks.