Futures Slide as Chinese AI Breakthrough Sparks Chip Selloff; Bitcoin Recovers

Equity futures fell sharply on Friday as a surprise breakthrough from Chinese AI startup Moonshot sent chip stocks reeling and revived worries about the sustainability of the industry’s massive capital expenditure. S&P 500 futures were 0.8% lower and Nasdaq futures tumbled 1.7% as of 8:00 a.m. ET, according to Zero Hedge.

The selloff was triggered by Moonshot’s release of its Kimi K3 model, which the startup claims rivals top offerings from OpenAI and Anthropic — a move Zero Hedge described as reminiscent of last year’s “DeepSeek moment.” The release coincided with President Xi Jinping’s appearance at China’s premier AI summit, where he hailed the nation’s progress in developing low-cost AI. Separately, delays by Alphabet to the launch of its latest Gemini model further dented tech sentiment, Zero Hedge reported.

In premarket trading, all Magnificent Seven stocks were lower. Nvidia fell 2.4%, Amazon 1.4%, Microsoft 1.9%, Tesla 1.7%, Alphabet 1.5%, Meta Platforms 1.5%, and Apple 0.1%, according to Zero Hedge. Other chipmakers also declined, with Marvell Technology down 2% and Qualcomm 2%. The broader AI and semiconductor selloff extended from the previous session, with Asia AI baskets and China AI baskets — including Moonshot’s competitors Z.AI and MiniMax — falling 5-8% overnight.

JPMorgan analysts said the selloff points to “concerns over hyperscalers’ AI CapEx and the sustainability of the AI rally,” as cited by Zero Hedge. Bond yields moved lower across the curve, with the 2-year and 10-year Treasury yields down 2.1 and 2.8 basis points respectively. Oil prices rose 1.8%, with WTI crude at $80.47, after Kuwait said its power and water plants were attacked by Iran, escalating Gulf hostilities.

**Rotation and Expert Views**

Despite the sharp tech decline, some market participants viewed the move as a necessary rotation. Francisco Simon, European head of strategy at Santander Asset Management, told Zero Hedge that the selloff appears moderate relative to the preceding rally. “We would distinguish between fundamentals and positioning,” he said. “From a fundamental perspective, the picture remains solid: earnings momentum has been exceptional this year, and results are still coming in strongly.”

Beata Manthey, head of European and global equity strategy at Citigroup, said sharp rotations are required for the equity rally to broaden beyond tech. “The market has started to hope for some long-awaited broadening,” she told Bloomberg Television, as cited by Zero Hedge. “For that to happen, you need to have some rotations, and rotations tend to happen in quite a violent way sometimes — and this is what we’re seeing right now.”

**Corporate Moves**

Several major companies reported results that weighed on sentiment. Netflix fell 10% after forecasting a second consecutive quarter of slowing sales growth, overshadowing an otherwise in-line quarter, according to Zero Hedge. Intuitive Surgical tumbled 10% after maintaining its full-year procedure growth forecast despite beating second-quarter estimates. Autoliv dropped 5% after missing earnings consensus. Staar Surgical fell 8% on weak sales in Europe, the Middle East and Africa, reflecting turmoil in the region.

SpaceX aborted Thursday’s Starship rocket mission after some engines failed to ignite, and its stock fell 3% to $125, the lowest since its IPO less than two months ago, Zero Hedge reported.

**Crypto Markets Hit, Then Recover**

The AI-led risk-off wave also swept through cryptocurrency markets. Bitcoin briefly slipped below $63,000 before recovering to near $64,000, according to The Economic Times. The cryptocurrency was trading at $63,969 around 2 p.m. IST on Saturday, up 1.77% over 24 hours. Ethereum rose 0.93% to $1,843. Global crypto market capitalization increased 1.2% to $2.19 trillion, according to CoinMarketCap.

Piyush Walke, Derivatives Research Analyst at Delta Exchange, told The Economic Times that a broad risk-off sentiment pushed Bitcoin below $63,000 as the AI-driven selloff spread from equities to crypto. Bitcoin briefly dropped to $62,500 before recovering, but the rebound lacked strength, with the price failing to form higher highs and slipping back below the 50-day moving average, keeping the broader downtrend intact. Bitcoin spot ETFs are on track for modest outflows this week after ending an eight-week streak of heavy outflows last week, he added.

Nischal Shetty, Founder of WazirX, said crypto markets experienced a volatile but constructive week. Early weakness triggered by rising geopolitical tensions and higher oil prices pushed Bitcoin briefly below $62,500, but softer-than-expected U.S. inflation data later in the week eased concerns about further interest rate hikes, helping both Bitcoin and Ethereum recover. Harish Vatnani, Head of Trade at ZebPay, noted that Bitcoin broke resistance at $64,200 and hit $65,600 before profit booking set in line with the U.S. market selloff.

Investing.com reported that Bitcoin was recovering toward $65,000 after sliding on the AI shock and doubts about a U.S. crypto bill.

**Broader Context**

The tech selloff masks a powerful rotation beneath the surface, Zero Hedge noted. The S&P 500 Equal Weight Index posted an all-time high in Thursday’s cash session, and the VIX remains below 20. However, the S&P 500 is down on the week and set to deepen losses on Friday. Traders are taking profits in crowded chip-related positions, though a key gauge of industry giants remains up 68% this year.

In China, memory chipmaker CXMT ignited a retail frenzy with an IPO to raise $9.8 billion — the second-largest in the nation’s history — with the retail portion 212 times oversubscribed, according to Zero Hedge. Separately, Japanese memory chipmaker Kioxia’s market capitalization has halved in just a month since becoming the nation’s most valuable company.

“When there’s panic, no one wants to be the last one in a selloff, so the selling pressure increases,” Guillermo Hernández Sampere, head of trading at MPPM, told Zero Hedge.