Trading results for 27 January 2025

The main event on Monday, 27 January, was undoubtedly the massive sell-off of shares in leading tech companies involved in the development, implementation, and use of artificial intelligence. This was triggered by news that the Chinese government, through the Bank of China, had allocated 1 trillion yuan (almost $140 billion) to the development of the DeepSeek project. DeepSeek develops AI-powered chatbots that experts say are more efficient and cost-effective than ChatGPT and similar platforms.

This announcement seemed to leave many market participants stunned, triggering a widespread sell-off. The extent of the sell-off can be illustrated by the performance of the Islamic securities index ITS Shariah (ITSS), which comprises 30 of the largest American companies. Despite only nine of the 30 stocks declining, the index lost almost 2% (-1.97%) of its value. The steep declines in those nine stocks overshadowed the gains of all the others. Notably, the top three decliners — Broadcom (AVGO, -17.40%), Nvidia (NVDA, -16.97%), and Oracle (ORCL, -13.79%) — saw their capitalisations drop by 14 to 18 per cent.

This pattern was observed across all indexes except for the Dow Jones (DJIA-30), which has minimal exposure to tech companies and managed to end an extremely volatile day in positive territory, gaining 0.65%.

Unsurprisingly, the NASDAQ Composite was the hardest hit in this scenario, with total losses exceeding 3% (-3.07%). Losses for the broad market index S&P500 were less severe (-1.46%) but still significant. Similarly, the global market index ITS World (ITSW) saw its losses limited to half a per cent (-0.57%) due to its strong diversification. The best performer in the ITSW index was British American Tobacco Plc ADR (BTI, +4.48%), with its share price rising more than 10% over the past two days, reaching a two-year high and setting a new local peak.

If Monday’s events are assessed more rationally, it is likely that the sell-off was short-lived and will not have far-reaching consequences. Although the decline was steep, it was limited to a relatively narrow group of stocks and did not spread across the broader market. Therefore, it is reasonable to expect that in the coming days this panic will subside, and investors will refocus on other factors such as the Federal Reserve meeting, macroeconomic data releases, and corporate earnings reports.