Morning Wrap: ASX 200 to rise, DeepSeek sparks Nvidia selloff, Nasdaq logs worst session of 2025

ASX 200 futures are up 14pts (+0.16%) as of 8:30 am AEDT.

In a nutshell:

• Chinese AI company DeepSeek rattled tech stocks after launching an AI assistant costs just ~US$5m to train (vs. ChatGPT ~US$100m)

• This sparked a sharp selloff across US-tech stocks like Nvidia (-16.9%), Alphabet (-4.0%) and Microsoft (-2.1%)

• Despite US indices selling off, breadth was positive as investors flocked to defensive and value pockets of the market

Let's dive in.

S&P 500 SESSION CHART

S&P 500 gapped down but finished off worst levels (Source: TradingView)

OVERNIGHT MARKETS

• Major US benchmarks tumbled, but finished off worst levels

• S&P 500 down 1.46% vs. session low of -2.27%, still marks worst session since 18-Dec Fed’driven selloff

• Breadth was still positive, with the Equal-weight S&P 500 outperforming the official benchmark by 153 bps 

• Today’s big story – Chinese AI company DeepSeek has launched its open-source V3 LLM, which has a training cost of around US$5.5m vs. OpenAI’s GPT-4o which costs of over US$100m

• DeepSeek sent tech stocks tumbling amid concerns about the investment efficiency of big tech companies, which have poured billions into AI-related investments, and the demand for GPUs as cost-effective alternative emerges 

• Q4 S&P 500 earnings growth currently sits at 12.7%, above the 11.9% expected at the start of earnings season

• Of the 16% of S&P 500 companies that have reported, 80% have beaten consensus EPS expectations, above the 77% one-year average

• Trump holds off on Colombia tariffs, but momentum for Canada, Mexico tariffs is growing (FT)

• Traders anticipate OPEC+ will stick with current production levels, resist Trump calls for cheaper oil prices (BBG)

• US yields slump to three-week lows on AI risk fuelling flight to safety (BBG)

• Record volume of PE stakes offloaded in 2024 (FT)

STOCKS

• China startup DeepSeek puts tech valuations in question, sets off AI market rout (BBG)

• Silicon Valley impressed with China made DeepSeek despite it working with less-advanced chips (WSJ)

• DeepSeek overtakes ChatGPT on Apple's App Store (RT)

• Street betting Tesla's 2025 sales will miss Elon Musk's target (FT )

CENTRAL BANKS

• Mexico central bank mulls larger rate cuts in early 2025 (BBG)

ARTIFICIAL INTELLIGENCE

• Analysts mixed on DeepSeek implications, some say real threat to Big Tech others say overreaction (BBG)

• Power and nuclear stocks fall as DeepSeek efficiency casts doubt on energy demand needs (CNBC)

• Nvidia loses over half a trillion dollars in market cap in largest daily drop on record (CNBC)

• Nomura says leveraged ETFs will sell ~US$22bn Monday to rebalance holdings (BBG)

• Selloff comes after traders purchased 2x Nasdaq ETF at fastest pace on record last week (BBG)

ECONOMY

• China manufacturing PMI unexpectedly slips into contraction in January, down to 49.1 or the lowest since August (BBG)

• China industrial profits fall for the third straight year despite December uptick (BBG)

ASX TODAY

• Newmont announces sale of Porcupine Operation for up to $425m (NEM)

• Southern Cross Media Group could be back on the radar of some opportunistic funds, Black Crane as a potential buyer (The Aus)

WHAT TO WATCH TODAY

• Tech: Expect heavy downward pressure on AI-related plays like NextDC, Megaport etc. That said, a few US-listed data centre names finished off worst levels (e.g. Equinix down 4.3% vs. session low of -8.8%, Digital Reality down 8.7% vs. session low of -13.4%). We'll just have to see how the dust settles

• Uranium: Uranium ETF (URA) down 11.2% overnight amid concerns that more efficient AI could erode energy demand. Canada's Cameco finished the session down 15.1%, closing at session lows

• Defensive outperformance: ASX 200 futures pointing towards a positive open, reflecting a decent overnight lead in (ex-Tech). The best performing sectors overnight were Staples (+2.85%), Healthcare (+2.19%) and Financials (+1.14%).

BROKER MOVES

• Ansell upgraded to Outperform from Hold; target up to $38 from $33.75 (CLSA)

• Aristocrat Leisure upgraded to Buy from Neutral; target up to $78 from $70 (GS)

• ASX downgraded to Underweight from Equal-weight; target cut to $55.05 from $58 

• DigiCo Infrastructure REIT initiated Buy with $5.60 target (UBS)

• Monadelphous upgraded to Outperform from Neutral; target up to $15.93 from $14.80 (MQG)

• Flight Centre upgraded to Overweight from Neutral; target up to $20 from $18.80 (JPM)

Macquarie issued a major REIT update, including:

Upgrades

• Abacus Group upgraded to Outperform from Neutral; target increased to $1.26 from $1.15

• Centuria Industrial REIT upgraded to Outperform from Neutral; target increased to $3.32 from $3.20

• Charter Hall Retail REIT upgraded to Outperform from Neutral; target increased to $3.45 from $3.42

• Dexus Property Group upgraded to Outperform from Neutral; target increased to $7.74 from $6.52

• Growthpoint Properties Australia upgraded to Outperform from Neutral; target increased to $2.61 from $2.35

• Lendlease Group upgraded to Outperform from Neutral; target decreased to $6.98 from $7

Downgrades

• Arena REIT downgraded to Neutral from Outperform; target cut to $3.99 from $4.15

• Charter Hall Group downgraded to Neutral from Outperform; target increased to $15.71 from $15.43

• Centuria Capital downgraded to Neutral from Outperform; target cut to $1.85 from $1.87

• Region Group downgraded to Underperform from Outperform; target cut to $2.03 from $2.38

• Scentre Group downgraded to Underperform from Outperform; target cut to $3.37 from $3.60

Stocks trading ex-dividend: 

• Mon 27 Jan: None

• Tue 28 Jan: None

• Wed 29 Jan: None

• Thu 30 Jan: Djerriwarrh Investments (DJW) – $0.072, 360 Capital Mortgage REIT (TCF) – $0.052, Perpetual Credit Income Trust (PCI) – $0.007, KKR Credit Income Fund (KKC) – $0.017, Gryphon Capital Income Trust (GCI) – $0.014

Other ASX corporate actions today: 

• Dividends paid: None

• Listing: None

• Earnings: None

• AGMs: None

Economic calendar (AEDT):

• 10:30 am: NAB Business Confidence (DEC)

• 11:30 pm: US Durable Goods Orders (DEC)