Huge U.S. technology companies that soared amid an artificial intelligence frenzy last year are getting pummeled after a little talked about Chinese startup demonstrated a chatbot that it says rivals versions from OpenAI and Google, and for a fraction of the cost.
Chipmakers Nvidia and Broadcom both suffered double-digit percentage declines after the exhibit from China’s DeepSeek. Software giant Oracle, a central player in the Trump administration’s recently announced $500 billion AI partnership, tumbled 8%. Microsoft slid 3.8% and Amazon fell 3.3%. Google parent company Alphabet and Facebook parent Meta each lost about 3.5%.
Those companies have had a growing impact on the fate of U.S. markets, which slumped Monday.
Futures for the S&P 500 sank 2.1% before the bell, while futures for the technology-heavy Nasdaq tumbled 3.8%. Futures for the Dow Jones Industrial Average declined 0.7%.
Analyst Dan Ives of Wedbush Securities said that while the China’s DeepSeek AI technology is impressive, the U.S. tech sector is still far ahead of China with regard to AI infrastructure.
“Launching a competitive (large language) model for consumer use cases is one thing,” Ives wrote in a note to clients. “Launching broader AI infrastructure is a whole other ballgame and nothing with DeepSeek makes us believe anything different.”
In European trading, Germany’s DAX dropped 0.9% at midday, while the CAC 40 in Paris shed 0.6%. Britain’s FTSE 100 declined 0.2%.
In Asia, Hong Kong’s Hang Seng gained 0.7% to 20,197.77, with shares in e-commerce giant Alibaba gaining 2.9% while search engine company Baidu jumped 4.9%.
The Shanghai Composite index fell, however, after a survey of manufacturers showed export orders in China dropping to a five-month low. It edged 0.1% lower to 3,250.60.
Tokyo’s Nikkei 225 gave up 0.9% to 39,565.80, extending losses after the Bank of Japan raised its benchmark interest rate to 0.25%, its highest level since 2008.
Computer chip-related shares saw big declines, with Tokyo Electron down 4.9% and test equipment maker Advantest sinking 8.6%.
The U.S. dollar dipped against the Japanese yen, at 155.29 yen, down from 155.72. The euro rose to $1.0529 from $1.0483.
In Bangkok, the SET fell 0.7%.
In energy trading, a barrel of U.S. crude was 61 cents lower at $74.05, while brent crude, the European standard, fell 66 cents to $76.89 a barrel.
Trading was closed in many other Asian markets due to holidays.
The Federal Reserve holds its latest policy meeting later this week. Traders don’t expect recent weak data to push the Fed to cut its main interest rate. They’re virtually certain the central bank will hold steady, according to data from CME Group.
