AI Model from China Shakes Up Tech Sector, Triggering Stock Market Plunge

Stocks tumbled in premarket trading on Monday, with Nasdaq futures plummeting 5%, fueled by concerns that a lower-cost artificial intelligence (AI) model developed in China could challenge the dominance of US tech giants.

Nvidia Plummets, Nasdaq Futures Volume Soars

Nvidia Corp. plunged 12% in premarket trading, potentially setting a record for the largest drop in market capitalization in a single session. Nasdaq 100 futures contracts also witnessed a surge in trading volume, reaching four times the 30-day average.

DeepSeek AI Model Raises Questions

The market selloff stems from the emergence of DeepSeek, a Chinese AI model that reportedly offers comparable performance to leading chatbots at a significantly lower cost. This raises doubts about the inflated valuations of AI-related stocks and the business model of Silicon Valley companies reliant on extensive research and development spending.

European Markets React

In Europe, ASML Holding NV tumbled 10%, the largest decline since October, dragging down the Stoxx 600 by 0.6%.

Tariffs, Earnings in Focus

Traders also cited President Donald Trump's weekend spat with Colombia, which involved the announcement of tariffs and their subsequent withdrawal, as another factor contributing to the bearish sentiment.

US Bond Yields Dip

The yield on 10-year US Treasury bonds fell as much as 10 basis points to 4.52% as investors sought safe haven assets.

Tech Earnings on Horizon

The upcoming week will feature earnings announcements from major tech companies, including Apple Inc., Microsoft Corp., Meta Platforms Inc., and Tesla Inc., which could further influence market sentiment.

Asia-Pacific Markets Mixed

In Asia-Pacific, AI-related stocks in China reacted positively, with Merit Interactive Co. surging by its daily limit. However, markets in Taiwan, South Korea, and Australia remained closed on Monday due to holidays.

Key Market Events

Significant market events scheduled for the week include:

* ECB President Christine Lagarde's speech on Monday
* US consumer confidence and durable goods data on Tuesday
* Chip-equipment maker ASML's earnings on Wednesday
* US rate decision on Wednesday
* ECB rate decision on Thursday
* Japanese unemployment and Tokyo CPI data on Friday