NASDAQ Futures tumble as China’s AI push rattles big tech

On By Littum

(Reuters) – Futures linked to the tech-heavy Nasdaq tumbled on Monday as the overwhelming popularity of a cheap Chinese artificial intelligence model sparked a sell-off in AI-related stocks, with megacap stocks including Nvidia the worst hit.

Chinese startup Deepseek has rolled out a free assistant it says uses lower-cost chips and less data, apparently challenging a widespread bet in financial markets that AI will drive demand along a supply chain from chipmakers to data centers.

“It is far too early to describe Deepseek as an existential threat to US-based AI solutions,” said Richard Hunter, head of markets at Interactive Investor.

“It will almost certainly put the cat among the pigeons as investors scramble to assess the potential damage it could have on a burgeoning industry that has driven much of the gains seen in the main indexes over the past few years.”

Deepseek’s AI assistant on Monday overtook rival Chatgpt to become the top-rated free application available on Apple’s App Store in the US.

NVIDIA, the poster child of AI, fell 6.9% in premarket trading, while other chipmakers such as AMD and Micron Technology fell 3.7% and 6.4%, respectively.

Microsoft and Meta Platforms each fell 3.3%. Both are set to report earnings later this week, along with Apple and Tesla.

Google Parent Alphabet fell 3.2% and Apple lost 1.4%.

AI server manufacturers Dell Technologies and Super Micro Computer slipped approx. 8% each.

at At 4:06 a.m. ET, the Dow E-minis were down 472 points, or 1.06%, the S&P 500 E-minis were down 120.25 points, or 1.96%, and the NASDAQ 100 E-minis were down 667 points, or 3.04 %.

Also adding some caution to global markets, the United States and Colombia pulled back from the brink of a trade war on Sunday after the White House said the South American nation had agreed to accept military planes carrying deported migrants.

The US Federal Reserve’s first interest rate decision of the year is expected on Wednesday, with markets largely expecting the central bank to keep its lending rate stable.

The December reading of the personal consumption expenditures (PCE) is due on Friday, a key measurement in assessing the inflation path.

Markets have been on edge recently over Trump’s proposed tariffs, which could exacerbate inflationary pressures and slow cuts, after he referred to trade policy several times last week without providing concrete details about his plans.

All three major indexes posted weekly gains last week despite a pullback on Friday, with the S&P 500 retreating from all-time highs.