Stock markets fell sharply on Monday, dragged down by fears that advances in artificial intelligence by Chinese upstarts could threaten the money-making power of U.S. technology companies.
Chinese AI company DeepSeek has made waves by combining the capabilities of state-of-the-art chatbots while using a fraction of the specialized computer chips that leading AI companies rely on. That has forced investors to reconsider the big returns of chipmakers like Nvidia, whose equipment powers cutting-edge AI systems, as well as companies like Google, Meta and OpenAI to build their own AI businesses. Investing a lot. .
Premarket trading signaled a sharp drop in U.S. markets at the open, with S&P 500 futures down more than 2 percent and the tech-heavy Nasdaq down nearly 4 percent. Tech stocks also dragged down markets in Europe and Japan.
The pain was concentrated on companies at the forefront of the AI boom, including multi-trillion dollar behemoths that posted the biggest annual gains for U.S. markets since the 1990s.
Nvidia was down 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 substantial declines.
“Even if DeepSec doesn’t maintain its current level of popularity, this development serves as a reminder that competition in the global AI arena is intensifying, and Nvidia will forever hold the pole position. “It will not last,” said Charu Channa, chief investment strategist at Saxo Bank. wrote In a research note.
Shares of Meta, which last week announced a big jump in its spending plans for data centers, large warehouses of computers that Power Intelligence fell more than 3 percent in premarket trading. Microsoft, which has also bet heavily on AI, fell about 5 percent premarket. Oracle, which is a joint venture partner with OpenAI and SoftBank, went public last week at an event with President Trump, fell more than 8 percent. SoftBank’s stock also lost more than 8 percent of its value in Tokyo.
The move cast a cloud over the tech giants as Meta, Microsoft and others prepared to present their latest quarterly earnings this week. Given their bumper profits in the past, analysts may question the executives’ future financial prospects under tough global competition.
(The New York Times has filed a lawsuit against OpenAI and its partner Microsoft, claiming copyright infringement for news content about AI systems. Both tech companies have denied the suit’s claims.)
The turmoil also hurt the stocks of utility companies that have opened new lines of business to meet the power needs of data centers. Constellation Energy fell more than 10 percent in premarket trading.
Mr Trump has pledged to ramp up US-made AI production to challenge China for global leadership in the technology. On Thursday, they signed one Executive order The aim is to remove barriers to the development of artificial intelligence. As the U.S. government works to maintain the country’s lead in the AI race, it is trying to limit the number of powerful chips, like Nvidia’s, that can be sold to China and other competitors.
Acknowledging the potential of DeepSec’s system, Bernstein analysts noted that their “initial reaction did not include panic.” Any computing capacity freed up by more efficient AI systems will be absorbed by rapidly growing demand, he said: “We still need, and have, a lot of chips.”
