Stock markets fell sharply on Monday, dragged down by fears that advances in artificial intelligence by Chinese pioneers could threaten the money-making 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 top AI companies rely on. That has made investors rethink the big returns they expect from the heady valuations of chipmakers like Nvidia, whose equipment powers the most advanced artificial intelligence systems, as well as the huge investments made by companies like Google, Meta and OpenAI to build their businesses with artificial intelligence. .
Premarket trading saw sharp declines for U.S. markets at the open, with S&P 500 futures down more than 2 percent and the tech-heavy Nasdaq off about 4 percent. Technology stocks also dragged down markets in Europe and Japan.
The pain was focused on companies at the forefront of the AI ​​boom, including the multi-trillion dollar behemoths that have driven the biggest consecutive annual gains for US markets since the 1990s.
Nvidia fell more than 5 percent in premarket trading, a move that wiped out more than $100 billion in market value. Other chipmakers such as AMD and semiconductor equipment specialists such as ASML also recorded significant declines.
“Even if 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 on top forever,” said Charu Chanana, head investment strategist at Saxo Bank. , he wrote in a research note.
Shares in Meta, which last week announced a big jump in its spending plans for data centers, the huge warehouses of computers that power artificial intelligence, fell more than 3 percent in premarket trading. Microsoft, which has also bet big on artificial intelligence, fell nearly 5 percent before the market. Oracle, which is a joint venture partner with OpenAI and SoftBank that was unveiled at an event with President Trump last week, fell more than 8 percent. SoftBank’s stock also lost more than 8% of its value in Tokyo.
The moves cast a cloud over tech giants as Meta, Microsoft and others prepare to report their latest quarterly earnings this week. Looking at their big gains in the past, analysts could ask executives pointed questions about the financial outlook going forward amid fiercer global competition.
(The New York Times sued OpenAI and its partner Microsoft, alleging copyright infringement of news content related to artificial intelligence systems. The two tech companies have denied the suit’s claims.)
The turmoil also hit shares of utilities that have opened up new lines of business that serve the voracious power needs of data centers. Constellation Energy fell more than 10% in premarket trading.
Mr. Trump has promised to accelerate the production of American artificial intelligence to compete with China for the world leadership in the technology. On Thursday, he signed an executive order aimed at “removing barriers” to the development of artificial intelligence. As the U.S. government works to maintain the country’s lead in the artificial intelligence race, it is trying to limit the number of powerful chips like those made by Nvidia that can be sold to China and other competitors.
While acknowledging the potential of DeepSeek’s systems, analysts at Bernstein noted that their “initial reaction does not include panic.” Any computing power freed up by more efficient AI systems will be absorbed by rapidly growing demand, they said: “We’re going to need and get a lot of chips.”
