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Investors dumped technology stocks in premarket trading Monday, sending U.S. indexes sharply lower after Chinese artificial intelligence startup DeepSeek demonstrated a chatbot that it says rivals the top versions from OpenAI and Google for a fraction of the cost.
Futures for the S&P 500 sank 2.3% before the bell, while futures for the technology-heavy Nasdaq tumbled 3.9%. Futures for the Dow Jones Industrial Average declined 0.8%.
The same tech companies that have benefitted from the AI frenzy in the past year were getting pummeled before markets even officially opened on Monday.
Chipmakers Nvidia and Broadcom both lost around 12%, while software giant Oracle lost 8%. Microsoft slid more than 6% and Amazon was down 4.5%. Google parent company Alphabet and Facebook parent Meta each lost about 3.5%.
Analyst Dan Ives of Wedbush Securities said that while the 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 early European trading, Germany's DAX dropped 1.1% to 21,178.37, while the CAC 40 in Paris shed 0.8% to 7,863.70. Britain's FTSE 100 declined 0.3% to 8,473.33.
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.
The official manufacturing purchasing managers index fell to 49.1 in January from 50.1 in December, slipping into contractionary territory on a scale where 50 and above indicates expansion. New orders and construction PMIs also fell.
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 was steady against the Japanese yen, at 155.45 yen, down from 155.72. The euro slipped to $1.0477 from $1.0483.
In Bangkok, the SET fell 0.7%.
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.