The Dow Jones Index (INDEXDJX: .DJI) remained steadfast on Monday, withstanding the DeepSeek storm that plundered US stocks. The index closed at +0.6%, cushioned by its relatively lower tech weight. However, some of its component stocks such as Nvidia, Microsoft, Meta and Tesla registered substantial losses. Investors will likely continue putting their money on the Dow as a safer alternative to the tech-heavy Nasdaq Index in the coming days.
DeepSeek Triggers Wipeout
China’s AI startup, DeepSeek unraveled tech stocks on Monday following news that its Large Language Models were developed at a small fraction of the cost incurred by US tech giants. The news triggered panic selling as many questioned the sustainability of multi-billion dollar AI-related expenditure by Microsoft, Meta and Amazon.
Nvidia stock price dropped by nearly 17%, wiping out $593 billion from its market capitalisation; the largest single-day loss by a company in history. Nvidia (NASDAQ: NVDA) is the undisputed leader in the manufacture of high-grade AI chips, and previously described the demand for its Blackwell chips as “insane”.
However, the DeepSeek phenomenon sent its market cap down from $3.5 trillion to $2.9 trillion in a matter of hours. That saw it lose its position as the world’s largest company, with Apple and Microsoft leapfrogging it. In addition, listed US tech companies lost more than $1 trillion in capitalization.
This week promises to be eventful for the Dow Jones Index as multiple component companies will announce their Q4 2024 earnings. Notably, tech companies, Microsoft, Apple, IBM and Amazon are among them. Investors will likely pay greater attention to their revenue projections in the DeepSeek era, and that could potentially spark a major disruption.
Dow Jones Index Projection
The momentum on the Dow Jones Index favours the upside if action stays above 44,607 points. Immediate resistance is likely to be at 44,735 points. However, a stronger momentum will break above that level and potentially test the second barrier at 45,802.
On the flip side, moving below 44,607 points will shift the momentum to the downside. That will likely establish the first support at 44,470. The upside narrative will be invalid if the Dow breaks below that level. That could trigger a stronger momentum and clear the path to potentially test the 44,352 points level.
