President Donald Trump has been at the peak of his volatility: at first, he announced sweeping “reciprocal tariffs” against the United States’ allies and adversaries. Then he took a U-turn and announced a 90-day pause on the implementation of these import duties, as more and more countries reached out to the US to negotiate. However, he has been ruthless on China, imposing more than 100% tariffs on them. Analysts see the “reciprocal tariff” game as a classic case of the world’s largest economy weaponising its global hegemony and forcing countries to come to the discussion table, so that America’s trade ties around the world can be redefined on the White House’s terms and conditions.
However, in the “game of reciprocity,” the worst-impacted were the stock markets around the world. And Wall Street and the tech-oriented Nasdaq weren’t exempt either.
Tech giants like Apple, Nvidia, Microsoft, HPE, Dell, Cisco, Amazon, Google, Salesforce, Intel, ServiceNow and Snowflake saw their shares go almost to dust and then rise steeply, all in just a few hours.
Betting on future winners
As widely reported, tech shares have been extremely volatile over the past year. Long before President Trump’s tariffs caused wider stock falls, share price graphs frequently resembled rollercoaster rides.
Elroy Dimson, a professor of finance at the University of Cambridge, says that one of the main causes of the volatility in the tech sector is that, similar to the early days of the automobile industry, we don’t know which tech companies will succeed in the long run.
During an interaction with BBC, Prof. Dimson said, “If you go back to the beginning of the last century, there were an awful lot of motor companies, and it was clear that automobiles were going to make a huge difference. But almost every company went bankrupt, and you didn’t know which company you should be buying.”
Of course, not every high-tech company is profitable. Two factors are used to calculate the return on an investment in shares: the growth in profits or dividends and the increase in share value. Boring companies may raise the value of their shares over time and pay consistent dividends. However, many high-tech businesses don’t pay dividends at all. Instead, they invest in future expansion, which is why their share prices vary based on expectations of future earnings.
Susannah Streeter, head of money and markets at the financial services company Hargreaves Lansdown in the United Kingdom, said, “Tech shares are more volatile, have high valuations, and have very high price-earnings ratios. Growth stocks are also more susceptible to changes in interest rates.”
“But also, investors in these shares are betting on not jam today but jam tomorrow,” Streeter suggests.
They are all attempting to identify the next big winner, not the one making money right now, but the one that will eventually pay out enormous dividends at some point in the future. Therefore, share values may plummet if there is any indication or news that future growth will not be as strong as anticipated.
However, any positive news causes share prices to rise, even if there is no change in current profits or losses, as investors pour money into what they believe will be the future winner. Due to the fact that current profits and dividends do not underwrite the shares, they are more volatile.
Prof. Dimson said, “The small changes in growth expectation can lead to large changes in share value, which can have a simultaneous impact on numerous companies.”
“You have companies that are reasonably similar, so when growth rates change, it affects quite a few companies in a similar way. This is not different from the dotcom boom at the beginning of the 2000s. There were companies with huge growth prospects. And when the growth prospects disappeared, these were the companies that disappeared,” he added.
Furthermore, there are still relatively few truly sizable high-tech businesses. In America, they are referred to as the “magnificent seven”: Tesla, Meta, the parent company of Facebook, Apple, Microsoft, Amazon, Google, and chipmaker Nvidia. Therefore, it doesn’t take much to frighten the market, particularly since many of these companies are relatively new and dominate industries where earlier leaders have failed. Are you familiar with Compaq, Boo, or Ericsson?
Fragile tech market dynamics
Since technology is evolving so quickly, unlike, say, the production of steel or food, there is a real risk that a new high-tech company will emerge and completely upend the business strategy of its most established competitors. That today’s “magnificent seven” will continue to be magnificent or even remain the same seven firms is not guaranteed.
For instance, two commonly reported factors have caused Tesla’s sales to decline. First, Tesla owner Elon Musk has been involved in President Trump’s administration, which has angered some potential customers. Furthermore, BYD and other Chinese electric vehicle companies are becoming more formidable rivals.
Meanwhile, after the launch of the Chinese AI chatbot DeepSeek at the beginning of 2025, Nvidia’s stock price fell precipitously. According to reports, this app was made for a small portion of what its competitors paid.
The immediate success of DeepSeek has sparked speculation about the extent of investments that US companies are planning as well as the future of America’s dominance in AI. Since Nvidia is leading the way in creating microchips for AI processing, this has become a source of concern for the company.
Nowadays, AI is the biggest tech game in town, and it seems everyone is claiming that AI is transforming their industry, their products, and their profits. They can’t all be right.
“At least in 1910, you knew what automobiles did. But with AI companies today, you have to rely on the wisdom of the crowd, and that’s not good enough for AI companies,” Prof. Dimson noted.
Robert Whaley, finance professor at Tennessee’s Vanderbilt University, said, “Not all AI companies can succeed. Technological volatility is undoubtedly influenced by AI. The race has begun.”
Thus, shares of AI are susceptible to forecasts. Additionally, if a company shows signs of falling behind in the AI race, many investors, most of whom lack a deep understanding of the topic, may decide to move on to a company that appears more advanced. Then there are those investors who, as long as they are in the “booming” high-tech industry, appear to be speculating and spreading their risks regardless of which companies’ shares they purchase.
To put it briefly, even in the high-tech industry, share prices are not always a reliable indicator of a company’s worth or its future. Alternatively, they might symbolise investors’ hope. Furthermore, hope does not always endure. It is frequently faddish, fleeting, and short-lived. Additionally, optimism can occasionally fade away or confront reality head-on. In short, it is volatile.
DeepSeek threat lingers
DeepSeek, the Chinese AI chatbot, upon its launch earlier in 2025, became the most downloaded free app in the United States. Simultaneously, Nvidia ended up losing more than a sixth of its value. In contrast with OpenAI, which is proprietary technology, DeepSeek is open source and free, challenging the revenue model of American companies charging monthly fees for AI services.
Also, DeepSeek came into existence despite Beijing being denied access to the high-end semiconductors required for manufacturing AI models. The model has been created at a fraction of the price of its Western competitors.
DeepSeek may not be as sophisticated as ChatGPT or any other American AI model, but it has disrupted the tech industry with the message that anyone can develop an AI model in a cost-effective manner while keeping it free and open for everyone. This has created doubts about the future of American dominance in AI, and no wonder Nvidia and its rival Broadcom both faced the stock market heat.
In a commitment to invest $500 billion (£400 billion) in the development of AI infrastructure in the United States, OpenAI recently joined a group of other companies. It is ‘the largest AI infrastructure project by far in history’ and will help keep ‘the future of technology’ in the United States, according to President Donald Trump, who made the announcement in one of his first statements since taking office again.
The open-source DeepSeek-V3 model, which powers DeepSeek, was reportedly trained for about $6 million, a much smaller sum than competitors’ billion-dollar expenditures. Chinese AI developers have collaborated and tried out novel technological approaches to carry on with their work without consistent supplies of imported advanced chips. Because of this, AI models now need a lot less processing power than they did in the past.
The Chinese company claimed that DeepSeek-R1 would perform “on par with” one of OpenAI’s most recent models for tasks like math, coding, and natural language reasoning. “AI’s Sputnik moment” is how Silicon Valley venture capitalist and Donald Trump advisor Marc Andreessen referred to DeepSeek-R1, referencing the Soviet satellite launched in 1957. The technological accomplishment of their rival was regarded at the time as having taken the United States by surprise.
All Western tech majors like Alphabet, Microsoft, Siemens Energy and chipmaker ASML faced routs in the American and European stock markets, and they should and must not dismiss it as a “once in a century” phenomenon, as post DeepSeek’s success, Chinese tech biggies like Baidu, Alibaba, and Tencent, alongside startups like Moonshot AI and Zhipu AI, have started spending big on the AI research and development front.
Fiona Cincotta, senior market analyst at City Index, said, “This idea of a low-cost Chinese version hasn’t necessarily been at the forefront, so it’s taken the market a little bit by surprise. So, if you suddenly get this low-cost AI model, then that’s going to raise concerns over the profits of rivals, particularly given the amount that they’ve already invested in more expensive AI infrastructure.”
However, Wall Street biggie Citi warned that although DeepSeek might threaten the market dominance of American firms like OpenAI, problems faced by Chinese companies might impede their growth.
“We estimate that in an inevitably more restrictive environment, US access to more advanced chips is an advantage,” analysts said in a report.
The turbulence across global markets, driven by tariff wars and AI disruption, emphasises a deeper uncertainty in the tech sector.
Investors are no longer reacting to profits alone but to projections, geopolitical shocks, and policy shifts.
As AI evolves and competition intensifies, market volatility is likely to remain the new norm. For the US, maintaining leadership will require innovation and strategic resilience in an increasingly unpredictable global tech landscape.