Stock markets fell sharply on Monday, dragged down by fears that advances in artificial intelligence by Chinese upstarts could threaten the moneymaking power of American technology giants.
The Chinese A.I. company DeepSeek has made waves by matching the capabilities of cutting-edge chatbots while using a fraction of the specialized computer chips that leading A.I. companies rely on. That has made investors rethink the large returns they are expecting on the heady valuations of chipmakers like Nvidia, whose equipment powers the most advanced A.I. systems, as well as the investments that companies like Google, Meta and OpenAI are making to build their A.I. businesses.
Premarket trading implied steep declines for U.S. markets when they open, with futures for the S&P 500 slumping more than 2 percent and the tech-heavy Nasdaq dropping more than 4 percent.
The pain was concentrated at companies at the forefront of the A.I. boom, including the multitrillion-dollar behemoths that drove the largest back-to-back annual gains for U.S. markets since the 1990s.
Nvidia was down more than 10 percent in premarket trading, a move that erases hundreds of billions of dollars in market value. Other chipmakers like AMD and semiconductor equipment specialists like ASML recorded similar declines.
“Even if DeepSeek does not maintain its current level of popularity, this development serves as a reminder that competition in the global A.I. arena is intensifying, and Nvidia may not be in the pole position forever,” Charu Chanana, chief investment strategist at Saxo Bank, wrote in a research note.
Shares of Meta, which last week announced a big jump in its spending plans for data centers, the huge warehouses of computers that power artificial intelligence, fell 3 percent in premarket trading. Microsoft, which has also bet heavily on A.I., fell more than 5 percent premarket. Oracle, which is a partner in a joint venture with OpenAI and SoftBank unveiled at an event with President Trump last week, fell more than 7 percent.
(The New York Times has sued OpenAI and its partner, Microsoft, claiming copyright infringement of news content related to A.I. systems. The two tech companies have denied the suit’s claims).
The turmoil also hit the stocks of utility companies that have opened new lines of business serving the voracious power needs of data centers. Constellation Energy fell more than 10 percent in premarket trading.
Mr. Trump has promised to accelerate the production of American-made A.I. to compete against China for global leadership in the technology. On Thursday, he signed an executive order aimed at “removing barriers” to the development of artificial intelligence. As the U.S. government works to maintain the country’s lead in the A.I. race, it is trying to limit the number of powerful chips, like those made by Nvidia, that can be sold to China and other rivals.
While acknowledging the potential of DeepSeek’s systems, analysts at Bernstein noted that their “initial reaction does not include panic.” Any computing capacity freed up by more efficient A.I. systems would be absorbed by fast-growing demand, they said: “We are still going to need, and get, a lot of chips.”