Stock markets fell sharply on Monday, dragged down by concerns that advances in artificial intelligence by Chinese upstarts could threaten the earnings power of U.S. tech giants.
Chinese AI company DeepSeek has made waves by matching the capabilities of high-end chatbots while using a fraction of the specialized computer chips that leading AI companies rely on. That has prompted investors to reconsider the big returns they expect from the heady valuations of chipmakers like Nvidia, whose equipment powers the most advanced AI systems, as well as the investments companies like Google, Meta and OpenAI are making to build their AI businesses.
Pre-market trading marked a steep decline for U.S. markets at the open, with S&P 500 futures down more than 2 percent and the tech-heavy Nasdaq down more than 4 percent.
The pain centered on companies at the forefront of the AI boom, including the multibillion-dollar giants that drove the largest annual returns for American markets since the 1990s.
Nvidia fell more than 10 percent in premarket trading, a move that will erase hundreds of billions of dollars in market value. Other chip makers like AMD and semiconductor device specialists like ASML saw similar 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 at the forefront forever,” Charu Chanana, chief investment strategist at Saxo Bank. , he wrote in a research note.
Actions from Targetwhich last week announced a big jump in its plans to spend on data centers, the vast warehouses of computers that power artificial intelligence, fell 3 percent in premarket trading. Microsoftwhich also bet heavily on AI, fell more than 5 percent ahead of its launch. Soothsayerwhich is partnering in a joint venture with OpenAI and SoftBank unveiled last week at an event with President Trump, fell more than 7 percent.
(The New York Times has he sued OpenAI and its partner, Microsoft, claim that copyright infringement has occurred in news content related to AI systems. The two tech companies denied the lawsuit’s claims).
The unrest also hit energy stocks, which opened up new business areas serving the voracious energy needs of data centers. The energy of the constellations were down more than 10 percent in premarket trading.
Mr Trump has promised to speed up the production of US artificial intelligence to compete with China for global leadership in the technology. He signed on Thursday implementing regulation aimed at “removing 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 those made by Nvidia that can be sold to China and other rivals.
Bernstein analysts acknowledged the potential of the DeepSeek systems, noting 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.”
