Market Beats | Deepseek AI Model Shakes US Tech Stocks; UBS Cuts Hundreds of Staff in Switzerland; Nvidia Market Cap Drops by Half a Trillion Dollar; Morgan Stanley Tries to Sell X Acquisition Loan; Amazon Signs 50,000 Sqft at Miami Office

—— Deepseek AI Model Shakes US Tech Stocks; UBS Cuts Hundreds of Staff in Switzerland; Nvidia Market Cap Drops by Half a Trillion Dollar; Morgan Stanley Tries to Sell X Acquisition Loan; Amazon Signs 50,000 Sqft at Miami Office

1. Deepseek AI Model Shakes US Tech Stocks

The global technology sector experienced a significant shake-up due to the success of the Chinese AI startup DeepSeek, leading to heightened scrutiny over America’s position as a tech leader. This development particularly impacted chip-related stocks, with industry giants like Nvidia and ASML experiencing sharp declines.

Additionally, market volatility was exacerbated by President Donald Trump’s actions involving trade tariffs. He initially announced extensive tariffs on Colombia which disrupted overseas markets. However, he withdrew these tariffs shortly after a deal was reached regarding the return of deported migrants, affecting currencies like the Mexican peso and the South African rand.

In response to the uncertainties in the global market, investors shifted their focus to safer assets. This shift is evident in the rallying of Treasuries, with the 10-year US yield dropping by as much as 10 basis points to a new low of 4.52% since January 2. Moreover, haven currencies like the yen and the Swiss franc saw increases.

Meanwhile, China’s economic activity showed unexpected signs of weakening, interrupting a recovery initially spurred by stimulus measures and highlighting the ongoing need for Beijing to intervene to prevent further economic deceleration.

In Europe, continued underperformance of the economy has convinced the European Central Bank (ECB) of the possibility to further stimulate growth by reducing interest rates for the fourth consecutive meeting.

The tech sector experienced a particularly notable downturn, driven by speculative investments fleeing from tech stocks and broader risky investments. This shift was largely triggered by the release of the latest version of DeepSeek, an AI assistant that has quickly risen to prominence, rivaling ChatGPT in performance but requiring less sophisticated hardware, leading to its rapid popularity in app stores.

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2. UBS Cuts Hundreds of Staff in Switzerland

UBS Group AG has initiated a series of job cuts in Switzerland, impacting hundreds of employees across various levels of the organization, according to sources familiar with the situation.

This recent reduction in workforce affects both senior management and junior staff, with those affected being offered the chance to participate in a program that gives them up to a year to secure a new position within the bank.

These layoffs are part of UBS’s ongoing strategy to consolidate its operations following the acquisition of its former competitor, Credit Suisse, in a rescue deal during 2023. UBS has previously announced that the merger would result in approximately 3,000 job losses in Switzerland.

Concurrently, UBS is making efforts to remove any public association with Credit Suisse, including replacing its logos at the former headquarters in Zurich and transitioning IT systems to eliminate the rival’s presence and integrate client data into UBS’s platform.

Despite these significant changes, a UBS spokesperson has stated that the bank aims to keep the scale of job reductions both in Switzerland and globally to a minimum. At the end of 2023, the combined entities of UBS and Credit Suisse employed about 35,000 staff in Switzerland.

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3. Nvidia Market Cap Drops by Half a Trillion Dollar

Nvidia Corp. experienced a significant drop in its stock price, driven by investor concerns about the emergence of the Chinese AI startup DeepSeek, resulting in an unprecedented loss in market value for the company. On Monday, Nvidia’s shares fell by as much as 18%, marking the largest decline since March 2020. During early afternoon trading in New York, this plunge led to a reduction of $560 billion in Nvidia’s market capitalization, setting a new record for the largest single-day market value loss in U.S. stock market history. This surpassed the previous record set in September, when a 9% drop erased approximately $279 billion in value.

The impact of Nvidia’s decline extended beyond the company itself, influencing the broader stock market due to Nvidia’s significant presence in major stock indices. This particular selloff contributed to eight of the top ten largest one-day declines in the S&P 500 Index by market value, as noted by Bloomberg.

On the same day, the S&P 500 dropped as much as 2.3%, and the Nasdaq 100 saw a decrease of up to 3.6%, although it later recovered some of those losses.

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4. Morgan Stanley Tries to Sell X Acquisition Loan

Wall Street banks, aiming to unload debt related to X—previously known as Twitter—are enticing potential buyers with a notable asset: a stake in Elon Musk’s AI venture. A consortium led by Morgan Stanley is set to offer up to $3 billion of senior secured debt, which financed Musk’s 2022 acquisition of the company. A significant boost to X’s valuation comes from its previously undisclosed ownership, estimated at about $6 billion, in xAI Corp., Musk’s AI startup.

This enticing element for potential investors is the claim they would have on X’s share in xAI, which is valued based on recent fundraising efforts that placed xAI’s worth at approximately $50 billion. Despite the ongoing turmoil in the markets, particularly with concerns over the impact of China’s DeepSeek AI on U.S. tech stocks causing widespread selloffs, the banks expanded their efforts to sell this debt on Monday.

This decision came even as the unsettling market conditions led other borrowers to hold off on their debt offerings, highlighting the challenges and opportunities in the current financial landscape.

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5. Space Exploration Startup Furloughs Most Staff

Space Perspective, a startup supported by Richard Branson that aims to take tourists to the stratosphere via balloon, has faced significant financial challenges, leading to the furlough of most of its workforce. The company, based in Titusville, Florida, has retained only a minimal number of employees following internal announcements made in November and December, according to sources who wished to remain anonymous due to the confidential nature of the situation.

The financial difficulties have also led to legal issues. Last week, the Titusville-Cocoa Airport Authority filed a legal complaint against Space Perspective, claiming the company owes over $90,000 in unpaid rent for the period from May to November. On December 2, the company received a notice of default from the airport authority, which threatened to terminate Space Perspective’s leases and evict the company unless it paid the full amount owed within ten days.

A spokesperson for Space Perspective acknowledged the furloughs, stating that the company is repositioning itself as it seeks further funding. However, the company has not provided additional comments on the number of jobs affected, the specific reasons for the furloughs, or the lawsuit filed by the airport authority. This situation underscores the financial and operational hurdles faced by the ambitious aerospace venture.

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6. Amazon Signs 50,000 Sqft at Miami Office

Amazon.com Inc. is expanding its operations to Miami’s Wynwood neighborhood, marking a significant presence with the district’s largest office lease to date. The e-commerce giant has secured 50,333 square feet at the nearing completion Wynwood Plaza, a mixed-use development that also includes tenants such as Marcelo Claure’s investment firm and the law firm Weitz & Luxenberg.

Wynwood Plaza, a project co-invested by Claure, features a 12-story office tower, 509 luxury rental apartments, retail spaces, and restaurants. This development is spearheaded by L&L Holding Co. and Oak Row Equities. The move by Amazon is seen as a testament to Miami’s burgeoning role as a dynamic and rapidly growing market within the American economy, according to Erik Rutter and David Weitz, managing partners at Oak Row Equities.

The Wynwood neighborhood, once known primarily as a warehouse district adorned with graffiti murals, has transformed into a vibrant hub for residential and office development.

This transformation is further evidenced by the establishment of other significant companies in the area, including Peter Thiel’s Founders Fund and Spotify Technology SA, with the latter occupying all the office space at The Oasis, another project by Oak Row.

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7. NY Governor Plans $13.5mn Budget to Ban Phones in Class

New York Governor Kathy Hochul has proposed allocating $13.5 million in her upcoming budget to assist school districts in enforcing a classroom ban on cell phones. This initiative aims to create a distraction-free learning environment for students. The budget allocation, pending legislative approval, is intended to cover the expenses associated with implementing the ban, such as acquiring materials to securely store phones during school hours.

The proposed ban would impact approximately 2.5 million students across New York’s 4,400 public schools. Governor Hochul, who advocated for this policy last year, highlights its potential benefits for both mental health and academic performance by mitigating the distractions caused by excessive screen time.

This concern is supported by findings from a Pew Research Center survey, which indicates that 70% of high school teachers and one-third of middle school teachers view student distraction by cell phones as a significant issue in their classrooms.

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