- Nvidia fell more than 13% and Nasdaq 100 futures fell after Chinese startup DeepSeek spooked investors.
- DeepSeek showed last week that it's quickly catching up with OpenAI's offerings.
- AI-related stocks in Asia and Europe, including SoftBank and ASML, also fell sharply.
Global tech stocks took a battering on Monday after an unexpected launch by Chinese artificial intelligence startup DeepSeek spooked AI investors.
In the US, Nasdaq 100 futures were down 3.3%, and chip trailblazer Nvidia tumbled more than 13% ahead of the opening bell.
Dutch chipmaker ASML also fell more than 10% in morning trading in Amsterdam.
In Asia, AI investor SoftBank fell more than 8%, while Tokyo Electron slipped 4.9%. Japanese chip companies Disco Corp and Advantest, a key supplier to Nvidia, were also down 1.8% and 8.6% respectively.
The declines come after DeepSeek unveiled a new flagship AI model called R1 that showcases a new level of "reasoning." The Chinese AI lab's solution, released in a paper last Monday, was close in capability to OpenAI's model while being far cheaper.
OpenAI fully released o1 — "models designed to spend more time thinking before they respond" — to a positive reception in December.
DeepSeek has shown how quickly it can close the gap, sparking fears among investors, politicians, and developers about how long the US can maintain supremacy in the AI race.
Since last Monday, the DeepSeek app has hit No. 1 on the Apple App Store's Top Free Apps Chart.
"The AI super-race is seeing new challengers emerge and not everyone is going to win. The companies that enjoyed first-mover advantage will now be under pressure to launch something even better or be left behind," said Russ Mould, an AJ Bell investment director, in a morning note.
"These market movements suggest investors are worried about disruption to what has so far been an easy ride for most stocks linked to the AI theme."