European shares slid on Monday as the technology sector joined the retreat in other markets after China’s upgraded low-cost, low-power artificial intelligence (AI) model sparked worries about the profits of rivals and the need for costly chips.
The pan-European Stoxx 600 was down 0.6% by 9.41am GMT (11.41am), tracking a move lower in global equities. Futures tracking the tech-heavy US Nasdaq composite tumbled 3.1%.
Chinese start-up DeepSeek has rolled out a free assistant that it says uses lower-cost chips and less data, seemingly challenging a widespread bet in financial markets that AI will drive demand along a supply chain from chipmakers to data centres.
The news rattled European tech index, which slid 5.8% and was on track for its worst day since October 15.
Chip equipment maker ASML slid 11.5% to a near nine-week low, while ASM International slumped more than 15%.
Siemens Energy, which provides electric hardware for AI infrastructure, sank 17.4% to the bottom of Stoxx 600, while other AI-exposed firms such as Schneider Electric dropped 8.1%.
“This idea of a low cost Chinese version hasn’t necessarily been forefront, so it’s taken the market a little bit by surprise,” said Fiona Cincotta, senior market analyst at City Index.
“So if you suddenly get this low-cost AI model, then that’s going to raise concerns over the profits of rivals, particularly given the amount that they’ve already invested in more expensive AI infrastructure.”
The sell-off also comes ahead of major tech earnings on Wall Street, with trillion-dollar firms such as Apple, Meta, Microsoft and Tesla expected to post their quarterly earnings this week that should justify their overblown valuations.
With only a few days remaining before the US President Donald Trump’s February 1 deadline for imposing significant trade tariffs on key trading partners, market uncertainty has intensified, adding to an already turbulent week for investors.
The week ahead is also packed with key interest rate decisions by central banks globally, particularly the policy verdicts from US Federal Reserve and European Central Bank.
For the ECB, market participants have already priced in a quarter point cut, while they expect the Fed to keep rates on hold.
Fourth-quarter GDP numbers for the eurozone and Germany, with inflation data for major European economies, are also part of a data-loaded week.
On the day, German business morale unexpectedly improved in January thanks to a more positive assessment of the current economic situation.
Among other stocks, Ryanair added 4.8% after the low-cost carrier posted a bigger-than-expected quarterly profit.
UMG jumped 5.2% to a six-month high after the world’s biggest music label announced a new agreement with audiostreaming giant Spotify.
Reuters
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.