S&P 500 Market Update: AI Sector Faces Sharp Decline Amid DeepSeek's Breakthrough

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Highlights

• On Monday, January 27, the S&P 500 dropped 1.5%, influenced by a cost-effective, high-performance AI model from Chinese startup DeepSeek, shaking the U.S. technology sector.
• Stocks of companies tied to AI, including power utilities and semiconductor manufacturers, experienced steep declines as market expectations adjusted.
• Telecom giant AT&T saw stock gains following robust subscriber growth, surpassing quarterly revenue and profit forecasts.

The new trading week opened with mixed results across major U.S. equity indexes as investors anticipate the Federal Reserve's upcoming interest rate decision under the renewed Donald Trump administration.

Pressure mounted on the tech sector after DeepSeek's AI app outperformed OpenAI's ChatGPT, becoming the top free download on Apple's platform. Despite its lower development costs, DeepSeek's AI model rivals leading U.S. counterparts, prompting questions about AI market dominance and profitability.

The S&P 500 declined by 1.5%, with technology stocks driving the Nasdaq down 3.1%. Conversely, the Dow Jones Industrial Average rose modestly by 0.7%.

Shares in power generation companies, previously buoyed by anticipated AI data center demand, suffered notable losses. Vistra (VST) plunged 28.3%, marking the largest drop in the S&P 500, while Constellation Energy (CEG) fell 20.9% amid waning enthusiasm for nuclear-powered AI infrastructure.

Other firms linked to AI infrastructure also saw stock declines. Networking equipment provider Arista Networks (ANET) dropped 22.4%, and energy technology company GE Vernova (GEV) decreased 21.4%, reflecting diminished optimism for AI data center energy needs.

Semiconductor stocks, including Broadcom (AVGO) and Nvidia (NVDA), which had benefited from AI-driven investment, also fell sharply by 17.4% and 16.9%, respectively.

In contrast, American Waterworks (AWK) surged 6.9%, leading the S&P 500 gains after its subsidiary secured $19.3 million in low-interest loans for infrastructure projects in Pennsylvania, focusing on water service line replacement and wastewater treatment enhancements.

AT&T (T) shares increased 6.3% following strong fourth-quarter results and higher-than-expected postpaid wireless subscriber additions, driven by popular bundled 5G and fiber internet plans.

HCA Healthcare (HCA) rose 6.1%, rebounding from previous losses after reporting quarterly revenue and earnings per share that exceeded forecasts, despite missing adjusted EBITDA estimates. Analysts at Mizuho maintained an "outperform" rating, citing volatility in direct provider payments and suggesting the initial negative market reaction was overstated.

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