Magnificent 7 stocks set for $1 trillion rout on DeepSeek panic
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Illustration: Sarah Grillo/Axios
Investors worldwide stand to lose more than $1 trillion on Monday because of the sudden fear that the market-sustaining AI spending boom might have been for nothing.
Why it matters: The so-called Magnificent 7 stocks are heavily leveraged to hundreds of billions of dollars in planned AI investment — and the entire market, in turn, hangs on their performance.
Catch up quick: There's a global rout in tech stocks Monday, caused by a panic linked to the new Chinese AI platform DeepSeek.
- Last week the company released its R1 model, which competes with the world's very best from the likes of OpenAI and Anthropic — but it's free, open-source, and was developed at a tiny fraction of rivals' costs.
That's driving fears that the planned AI spending boom, with its hundreds of billions of dollars in capex on data centers and chips and power, might not be necessary if there's a way to do it faster, cheaper and better with old hardware.
By the numbers: As of 6am ET, shares of AI chip giant Nvidia were down more than 13% in premarket trading, implying a loss of more than $500 billion in market capitalization at the open.
- S&P 500 futures were pointing to a drop of more than 2%, an unusually heavy decline seen only a few times a year.
- ETFs linked to chipmakers, and shares in chip equipment manufacturers were broadly 8%-10% lower as well.
The Magnificent 7 stocks — Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, Tesla — were also down sharply in premarket trading, dragged lower by Nvidia but also the broad tech sell-off in general.
- Their implied loss in market capitalization at the open exceeds $1 trillion, with most of the stocks down 5% or more.
The bottom line: The S&P 500's incredible run the last two years has been heavily tied to the Magnificent 7 — but as a result, the market's gains are more heavily concentrated in that small handful of stocks than they've been in decades.
- In a period of such heavy concentration, what goes up can come down very, very quickly.
