Ruthless AI progress and brutal tech sell-off. Nvidia down, and the FOMC ahead.

History has seen many Black Mondays. Several significant events have earned the title of “Black Monday” on the stock market, marked by sharp declines in major indices. The first significant instance occurred on October 28, 1929, during the Wall Street Crash that ushered in the Great Depression. On this day, the Dow Jones Industrial Average fell by 12.8%, following a decline of 13% on the preceding Thursday, known as Black Thursday.

Decades later, on October 19, 1987, another Black Monday shocked the financial world. The Dow Jones Industrial Average plunged by 22.6% in a single day, and on March 9, 2020, another Black Monday occurred, fueled by the onset of the COVID-19 pandemic and a price war in the oil markets. The Dow Jones Industrial Average fell by 2,013 points (7.8%). The S&P 500 and Nasdaq also declined by 7.6% and 7.3%, respectively, with trading temporarily halted due to a market circuit breaker.

And here we are again with yesterday’s Monday and blood on the markets. NASDAQ’s crash.

The NASDAQ fell by over 4% on Monday, which is massive volatility for a one-day index move. Technically, we reached the 0.382 fib retracement, but the demand reaction has pushed the price to the 0.236 retracement for now. RSI is below the 50 threshold, and there was a bearish crossover on MACD, which together gives us a rather unfavorable picture. The upcoming session and the FOMC meeting, ending with the decision on interest rates on January 29, will be key.

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AI disruption

Yesterday’s market downturn was driven by the disruptive debut of DeepSeek, a Chinese AI company whose groundbreaking technology rivaling OpenAI’s ChatGPT sent shockwaves through Wall Street. With development costs of just $6 million, DeepSeek raised concerns about the overvaluation of AI-driven stocks like Nvidia and ASML, questioning future demand for advanced AI chips. This unexpected move highlights the rapid evolution of AI, leaving investors to reassess their positions in the sector.

NVIDIA plummets.

That’s precisely what NVIDIA shares looked like at closing on Monday. A 17% drop (reaching even as much as 18%) and virtually no demand response, as evidenced by the barely visible candle wick. RSI in deep bearish territory and a crossover on MACD indicate decidedly negative momentum.

What’s interesting is that on Monday, Nvidia saw nearly $600 billion wiped from its market capitalization, marking the largest single-day loss for any company in U.S. history. Only 14 companies in the world have a larger capitalization than NVIDIA lost in a single day. Despite this, the company remains the third largest in the world, with a valuation of $2.9T.

Conclusion

The current week started with a bang. Tomorrow, we have the FOMC meeting and a decision on interest rates. The consensus of 97% indicates that rates will remain unchanged. Until the decision, however, we may have solid market indecision and increased volatility. Today’s opening in the US should also indicate which direction the market is heading.

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