China's low-cost AI app rattles tech stocks

Technology shares around the world slid on Monday as a surge in popularity of a Chinese discount artificial intelligence model shook investors' faith in the AI sector's voracious demand for high-tech chips.

Startup DeepSeek has rolled out a free assistant it says uses lower-cost chips and less data, seemingly challenging a widespread bet in financial markets that AI will drive demand along a supply chain from chipmakers to data centres.

Nasdaq futures fell over 3 percent, S&P 500 futures tumbled nearly 2 percent.

Dominant AI chipmaker Nvidia's 8.4 percent slide led declines among heavyweight megacap stocks in premarket trading, with Microsoft off by 4 percent, Meta Platforms down 3.7 percent and Alphabet shedding 3.1 percent.

European tech stocks slid over 5 percent, set for their worst day since October.

Chip maker ASML fell 9.4 percent, and Siemens Energy, which provides electric hardware for AI infrastructure, slid around 20 percent at one point from a record high on Friday.

Japan's Nikkei shed nearly 1 percent, weighed by heavyweight tech names. AI-focused startup investor SoftBank fell over 8 percent.

"We still don't know the details and nothing has been 100 percent confirmed in regards to the claims, but if there truly has been a breakthrough in the cost to train models from US$100 million+ (HK$780 million) to this alleged US$6 million number this is actually very positive for productivity and AI end users as cost is obviously much lower meaning lower cost of access,” said Jon Withaar, senior portfolio manager at Pictet Asset in Singapore.

"Is it negative for Nvidia in the short term? Yes, as expectations are sky high on Blackwell (chips)and positioning is long in anything AI supply chain related, but ultimately anything that makes AI cheaper to implement is positive for those selling AI related products and applications and using AI related tools - an ever growing group.

"But let's see the devil is in the detail and as you can imagine a Chinese model will be controversial for many uses. Still it is a cold shower and a dose of reality for a sector that probably needed it."

REUTERS