Investing.com — Traders were observed rushing to secure protection as technology shares experienced a sharp decline.
The CBOE VIX index, a tool that gauges expected S&P 500 volatility and is often referred to as Wall Street’s fear gauge, surged by over 30% to just above 19. This rise indicates traders are willing to pay a premium for put options.
Put options grant the purchaser the right to sell the underlying security at a specified level and are commonly used to safeguard portfolios against market downturns.
The stock market was trading notably lower on Monday morning. This drop coincides with news that China’s DeepSeek has developed an open-source Language Learning Model (LLM) that performs on par with GPT-4o but requires significantly less computing power.
According to analysts, this development could potentially cause a shift in the AI industry’s focus towards Return on Investment (ROI).
“We have been highlighting our concern about AI’s ROI, as the massive investment in GPUs (eg, just NVDA’s 2024 GPU rev could > US$200bn) has generated little return. We have seen model improvement (at a high cost), but no concrete examples of AI monetization that could justify the investments,” Edison Lee, analyst at Jefferies, wrote.
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