The ProShares Trust Ultra VIX Short Term Futures ETF (UVXY) is experiencing significant movement due to heightened volatility in the market, driven by concerns surrounding the Chinese AI startup DeepSeek. The unveiling of DeepSeek's cost-effective AI model has sent shockwaves through the tech sector, leading to a substantial drop in the stocks of major tech companies like Nvidia, Amazon, and Meta Platforms. This has resulted in a surge in the CBOE Volatility Index (VIX), which is up more than 15% as of early Monday, reflecting increased investor anxiety and demand for volatility hedging. The tech selloff, exacerbated by fears of a market-wide deleveraging effect, has contributed to the rise in volatility indicators, despite the relative calm observed in VIX futures.
The DeepSeek development has raised questions about the high valuations of AI-driven companies, potentially derailing investment strategies focused on AI infrastructure. The Nasdaq 100 futures experienced a significant drop, marking the largest intraday decline since August, as investors reassess the sustainability of the AI-driven rally in the tech sector. The VIX, often referred to as the "fear gauge," surged to 21.5, indicating heightened market uncertainty. This increase in volatility is further fueled by the anticipation of earnings reports from major tech firms like Apple and Microsoft, which are expected to show slowed profit growth amid inflated valuations.
The UVXY ETF rose to $19.87, marking an 11.50% increase from the previous close as of 10:00 AM on January 27th.