LONDON (Reuters) – Technology shares around the world slid on Monday as a surge in popularity of a Chinese discount artificial intelligence model shook investors’ faith in the AI sector’s voracious demand for high-tech chips.
Startup DeepSeek has rolled out a free assistant it says uses lower-cost chips and less data, seemingly challenging a widespread bet in financial markets that AI will drive demand along a supply chain from chipmakers to data centres.
MARKET REACTION:
Nasdaq futures fell over 3%, S&P 500 futures tumbled nearly 2%.
Dominant AI chipmaker Nvidia’s 8.4% slide led declines among heavyweight megacap stocks in premarket trading, with Microsoft off by 4%, Meta Platforms down 3.7% and Alphabet shedding 3.1%.
European tech stocks slid over 5%, set for their worst day since October. Chip maker ASML fell 9.4%, and Siemens Energy, which provides electric hardware for AI infrastructure, slid around 20% at one point from a record high on Friday.
Japan’s Nikkei shed nearly 1%, weighed by heavyweight tech names. AI-focused startup investor SoftBank Group fell over 8%.
COMMENTS:
JON WITHAAR, SENIOR PORTFOLIO MANAGER, PICTET ASSET MANAGEMENT, SINGAPORE:
“We still don’t know the details and nothing has been 100% confirmed in regards to the claims, but if there truly has been a breakthrough in the cost to train models from $100 million+ to this alleged $6 million number this is actually very positive for productivity and AI end users as cost is obviously much lower meaning lower cost of access.”
“Is it negative for Nvidia in the short term? Yes, as expectations are sky high on Blackwell (chips)and positioning is long in anything AI supply chain related, but ultimately anything that makes AI cheaper to implement is positive for those selling AI related products and applications and using AI related tools – an ever growing group.”
“But let’s see the devil is in the detail and as you can imagine a Chinese model will be controversial for many uses. Still it is a cold shower and a dose of reality for a sector that probably needed it.”
DANIEL TAN, PORTFOLIO MANAGER, GRASSHOPPER ASSET MANAGEMENT, SINGAPORE:
“The selloff in Japan and U.S. tech names should not be a surprise given high valuations based on P/E and P/B ratios. With the current rate of P/E priced for some U.S. and Japan tech names, the market is expecting future earnings to continue to justify the high prices of these tech names. That is definitely a high expectation to meet.”
“However, DeepSeek has shown over the weekend with its updated AI model that is cost-effective with OpenAI’s technology while running on reduced-capability chips, raising questions over the dominance of U.S. tech firms such as Nvidia Corp.”