Exchange-traded funds, or ETFs, with leveraged exposure to chipmaker Nvidia (NASDAQ:NVDA) experienced a dramatic Monday thanks to the debut of AI upstart DeepSeek.
These ETFs offer the potential for amplified profits at the cost of higher-than-usual fees of around 1% and greater volatility.
What Triggered The Selloff?
DeepSeek is the culprit. This Hangzhou, China-based AI startup launched a new model that poses a challenge to U.S. competitors, including Nvidia's core business.
DeepSeek's open-source AI model has already surpassed ChatGPT in downloads on Apple's app store, leaving the AI market in awe. Industry experts like venture capitalist Marc Andreessen called this moment a “Sputnik moment” for U.S. AI companies as this could be a ground-breaker in the AI space, reported Reuters.
The market's reaction was swift. Nvidia’s stock, a major player in the AI space, dropped nearly 17.65%, taking along semiconductor stocks like Broadcom (NASDAQ:AVGO) and Marvell Technology (NASDAQ:MRVL) in the ride south.
The iShares Semiconductor ETF (NASDAQ:SOXX), which tracks semiconductor stocks, also plummeted by 8.39%, experiencing its worst day since the pandemic-led selloff in March 2020.
As fear spread, investors flocked to safe-haven assets like U.S. Treasuries, leading to yields on the 10-year note dipping to a one-month low.
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