On Monday, technology stocks in Canada and the US fell sharply. In the US, the technology-heavy NASDAQ Composite Index dropped by more than 3%. The decline was driven by questions about which economic superpower, the US or China, is developing a position as the leader in artificial intelligence (AI). Technology stocks, particularly the “Magnificent 7” in the US, were the main drivers of global equity market gains over 2024.

• Chinese company DeepSeek came into the spotlight on Monday, sparking debate about who will emerge as an AI leader. DeepSeek has become a major competitor to the popular ChatGPT. Notably, the company has developed its AI technology at a portion of the cost.
• Some industry insiders questioned the innovation in DeepSeek’s AI system, suggesting it is built on already well-known processes and innovations.
• US President Donald Trump announced his commitment to making the US a global leader in AI technology. This includes spearheading a US$500 billion joint venture between three technology heavyweights to build up AI infrastructure in the US.
• Shares of NVIDIA Corp., which has been at the forefront of AI technology, fell over 16% on Monday. The rise of DeepSeek had investors questioning the relatively high valuations of technology stocks, bringing down the group.

The race for AI dominance is on. While developments in AI are coming swiftly, we’re still in the relatively early stages. There’s plenty of room for growth. In the US, the Magnificent 7 – Apple, Microsoft, Alphabet, Amazon, NVIDIA, Tesla and Meta – were the main drivers of US equity market growth in 2024, largely due to expectations for the capabilities of AI technology. Canadian equity markets also benefited from its strong technology companies in 2024, with names like Shopify, Celestica and CGI.

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