Market Sell-Off: China AI Push Sparks Tech Tumble, Nvidia's Double-Digit Slide 1/27/25

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David Faber (0:44)

Market insight and analysis. You're listening to the opening bell of CNBC Squawk on the Street.

Carl Quintanilla (0:50)

Good Monday morning. Welcome to Squawk on the Street. I'm Carl Quintanilla with Jim Cramer, David Faber at Post 9 of the New York Stock Exchange.

The DeepSeek Freakout is in full display as China's free open source model throws into question the entire AI buildout. Nvidia briefly was set for its biggest one day drop in five years. A ton of earnings and macro definitely on deck for the week. A roadmap will begin with Nvidia, Broadcom, and the chips in general plunging as the broader market also is lower ahead of the open. On news that this Chinese company has built a lower cost and possibly competitive AI model.

David Faber (1:23)

Plus, we also had the Fed on deck despite rate cut demands from President Trump. The Fed is expected to remain on hold this week. We're keeping an eye on shares of AT&T. They're rallying in the pre-market. Fourth quarter profit was up sharply. The company's bundled 5G fiber plans boosting holiday quarter subscriptions. But it's all about one thing this morning, Carl.

Carl Quintanilla (1:44)

That is for sure. This morning sell-off sparked by this Chinese AI startup called DeepSeek, if you haven't heard about it by now. It has surged to number one on Apple's App Store. It has surpassed ChatGPT. Its success with a less expensive model has taken a toll on shares of Nvidia and other chip makers. Jim Andreessen calls it the AI Sputnik moment.

Jim Cramer (2:06)

Right. Look, I think you can certainly make any claim you want. I think that what matters to me in the end is numbers.

Do you pause your Nvidia orders? Do you just say, you know what, I've spent a lot on Nvidia, now I can hold back? Or is this some sort of a prisoner's dilemma where if you hold back, then maybe Ellison goes and buys? I think that Nvidia is really the target here because it's cost so much money and it just doesn't seem to be able to command that kind of money if this is that good. But David, I'm going to leave you with something I think is really important. Please. What?

David Faber (2:39)

Please leave me with something that's really important.

Jim Cramer (2:41)

Well, I mean, this is a Chinese product.

David Faber (2:43)

It is.

Jim Cramer (2:44)

So, what I put in to my very helpful deep seat is, what famous picture has a man with grocery bags in front of a tank? And it initially says the famous picture you're referring to are Tank Man, Unknown Rebel, June 5, 1989 With that, I'd say maybe about as fast as Sequon got that first touch him. It says, it takes that back and says, sorry, I can't help you with that. And then secondarily, it says, sorry, that's beyond my current scope. Let's talk about something else. So, against the idea that you're spending too much on Nvidia is a censorship that I don't really think American companies can trust.

David Faber (3:19)

By the way, a warning to everybody who's downloading it as well, read the terms of service. Just read them carefully. I believe they may have access to all of your Gmail and be able to crawl all over it. Well, you may want to get rid of it. That's gotta be an issue. As we, of course, continue to talk about and debate TikTok as a national security threat, just keep in mind. Now, that said, when it comes to DeepSeek, listen, it was December 30th when we first heard about the performance of this Chinese AI model. Deirdre Bostes has done great reporting on it since then as well. It was the 20th. It was the inauguration day when we got these latest numbers. So even though we heard this was on the 20th and sort of built as that last week went along, you had the Stargate announcement of 100 billion, maybe as much as 500 billion. You had Zuckerberg on Friday say 60 to 65 billion in CapEx. You had Nadella reiterate 80 billion for Azure. So the numbers to the extent that these leaders in technology were at least somewhat aware of this, did not get impacted.