On Jan. 27, Nasdaq futures dropped 2.6%, and S&P 500 futures slipped 1.4% on Monday as a new AI model from Chinese startup DeepSeek raised concerns over AI profitability.

Nvidia shares fell 8.5% in Tokyo and 7% in Frankfurt, with other tech giants like Tesla, Amazon, and Meta declining over 2% in early European trading.

DeepSeek’s free AI assistant, powered by cost-efficient Nvidia H800 chips, has challenged the prevailing belief that AI growth will sustain high-tech chip demand.

The market is now questioning capital expenditure by major tech firms, further pressuring chipmakers and data center stocks.

SoftBank dropped 8% following its US$19 billion data-center venture announcement, while Tokyo Electron slid 5%.

Despite Nvidia’s impressive 196% gain in 2024, investor sentiment is shifting amid uncertainties surrounding AI’s long-term demand.