AI Investors Rush to Cash in Two-Year Gains

🔹Stock indices in the U.S. and Europe have declined due to a widespread sell-off of shares in AI-related companies. This sudden sell-off was triggered by rumors about the exceptional performance of China’s DeepSeek-R1 AI model, unveiled on Monday. The model is freely available to users, costs significantly less than similar U.S. models, and has, in some cases, outperformed ChatGPT.

🔹In this environment, investors are exiting trades that have been popular over the past two years. Nvidia shares dropped by more than 10% in pre-market trading, causing the Nasdaq-100 index to fall over 5% compared to Friday’s closing level.

🔹Markets are highly sensitive to this development, as fierce price competition has raised doubts about the profitability timeline of multi-billion-dollar AI investments. Nvidia, in particular, is under significant pressure, with its shares down 11%, falling below $127—a level testing the lower bounds of its trading range since October.

Seller Targets

🔹The nearest target for sellers is the 20,000 level. This critical level lies near the 200-day moving average. Approaching this level attracted buyers in August, September of last year, and October 2023.

🔹A drop below this level early in the week could lead to a further decline in stock prices, potentially resulting in an additional 5–10% decrease in market value.