:max_bytes(150000):strip_icc():format(jpeg)/GettyImages-2195693962-d10deed5742541ebbf00e0414a377f1e.jpg "Traders work on the floor of the New York Stock Exchange during morning trading on January 24, 2025 in New York City.")
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Key Takeaways
- The S&P 500 flatten 1.5% on Monday, Jan. 27, as a Chinese startup’s cost-efficient and high-performing AI model sent shockwaves through the U.S. tech sector.
- Dividends of companies like power generators and chipmakers that have benefitted from lofty AI expectations tumbled to start the employment week.
- AT&T stock pushed higher as strong subscriber additions helped the telecom giant top quarterly sales and profit vaticinates.
Major U.S. equities indexes were mixed to kick off the new trading week as the markets brace for the Federal Reserve’s head interest-rate announcement under the second Donald Trump administration.
The tech sector came under pressure Monday as an app from Chinese meretricious intelligence (AI) startup DeepSeek surpassed OpenAI’s ChatGPT as the most downloaded free app on Apple’s (AAPL) platform. DeepSeek said its after’s performance is comparable with that of U.S. AI leaders despite reportedly being developed for a fraction of the cost, raising in doubts about AI profitability and market leadership.
The S&P 500 fell 1.5%, while tumbling tech stocks contributed to a 3.1% risk for the Nasdaq. The Dow was the lone bright spot among the three main market gauges, edging 0.7% higher.
The bear uncertainty around AI weighed on shares of power generation companies that had surged over the past year as investors counted massive opportunities to provide electricity for energy-intensive AI data centers. Shares of Vistra (VST), the Texas-based utility that logged the S&P 500’s second-best doing in 2024, suffered the benchmark index’s heaviest losses Monday, plunging 28.3%. Constellation Energy’s (CEG) shares, another beneficiary of superior expectations for nuclear-powered AI data centers, fell 20.9%.
Utilities were not the only companies whose prospects have been hook up to AI infrastructure to see their share prices move lower following the DeepSeek developments. The souring outlook for AI data center moments also hit shares of networking equipment provider Arista Networks (ANET), which lost 22.4%. Shares of GE Vernova (GEV), the drive technology firm whose natural gas turbines have also garnered attention for their potential to meet information center power demand, dropped 21.4%.
Semiconductor companies that have benefitted from investors’ AI enthusiasm also took a hit on Monday. Broadcom (AVGO) deals were down 17.4%, while shares of AI chip behemoth Nvidia (NVDA) ended 16.9% lower.
Divisions of water and wastewater utility provider American Waterworks (AWK) jumped 6.9%, logging the top performance in the S&P 500 on Monday, after subsidiary Pennsylvania American O secured $19.3 million in low-interest loans from the Pennsylvania Infrastructure Investment Authority. The company plans to use the reserving for infrastructure improvement projects in the state, including replacing lead water service lines and enhancing wastewater treatment apparatus.
AT&T (T) shares added 6.3% after the company reported better-than-expected revenue and net income for the fourth quarter. The telecom monster also exceeded forecasts for postpaid wireless subscriber additions during the period, boosted by demand for discounted layouts that bundle 5G mobile with high-speed fiber internet service.
HCA Healthcare (HCA) shares advanced 6.1%, mending from losses posted on Friday after the hospital operator released its quarterly results. Although higher tenacious volumes helped HCA beat revenue and earnings per share (EPS) forecasts, the company fell short of estimates on adjusted EBITDA, which excludes order provider payments (DPPs). On Monday, analysts at Mizuho reiterated their “outperform” rating on HCA stock, noting the unpredictability of DPPs and suggesting that the approve negative earnings reaction may have been exaggerated.