Stock markets fall as investors worry about DeepSeek and China’s AI advances

Stock markets fell sharply on Monday, dragged down by fears that advances in artificial intelligence by Chinese upstarts could threaten the monetary power of US tech giants.

Chinese AI company DeepSeek has made waves by matching the capabilities of cutting-edge chatbots while using a fraction of the specialized computer chips that leading AI companies rely on. That has caused investors to rethink the big returns they expect from the skyrocketing valuations of chipmakers like Nvidia, whose equipment powers the most advanced AI systems, as well as the huge investments companies like Google, Meta and OpenAI are making to build their AI companies.

Premarket trading saw U.S. markets sharply lower as they opened, with S&P 500 futures down more than 2 percent and the tech-heavy Nasdaq down about 4 percent. Tech stocks also dragged down markets in Europe and Japan.

The pain was concentrated on companies at the forefront of the artificial intelligence boom, including the multi-trillion dollar gains that led to the biggest annual gains for US markets since the 1990s.

Nvidia fell more than 5 percent in premarket trading, a move that erased more than $100 billion in market value. Other chipmakers such as AMD and semiconductor equipment specialists such as ASML also recorded significant declines.

“While DeepSeek does not maintain its current level of popularity, this development serves as a reminder that competition in the global AI arena is intensifying, and Nvidia may not be in pole position forever,” Charu Chanana, Investment Strategist at Saxo Bank. , wrote in a research note.

Shares in Meta, which last week announced a big jump in its spending plans for data centers, the vast stocks of computers that power artificial intelligence, fell more than 3 percent in premarket trading. Microsoft, which has also bet heavily on artificial intelligence, fell nearly 5 percent before the market. Oracle, which is a partner in a joint venture with OpenAI and SoftBank that was unveiled at an event with President Trump last week, fell more than 8 percent. SoftBank’s stock also fell more than 8 percent of its value in Tokyo.

The moves cast a cloud over the tech giants as Meta, Microsoft and others prepare to present their latest quarterly earnings this week. Looking past their big profits in the past, analysts could direct pointed questions at managers about financial prospects in the future under tougher global competition.

(The New York Times has sued OpenAI and its partner, Microsoft, alleging copyright infringement of news content related to AI systems. The two tech companies have denied the suit’s claims.)

The turmoil also hit the stocks of utility companies that have opened up new lines of business that serve the voracious power needs of data centers. Constellation Energy fell more than 10 percent in premarket trading.

Mr. Trump has promised to speed up the production of American-made AI to compete against China for global leadership in the technology. On Thursday, he signed one announcement aimed at “removing barriers” to the development of artificial intelligence. As the US government works to maintain its lead in the AI ​​race, it is trying to limit the number of powerful chips, such as those made by Nvidia, that can be sold to China and other rivals.

While acknowledging the potential of DeepSeek’s systems, analysts at Bernstein noted that their “initial reaction does not include panic.” Any computing capacity freed up by more efficient AI systems would be absorbed by rapidly growing demand, they said: “We’re still going to need and get a lot of chips.”