European tech shares tumble as China's AI push spooks investors
Technology
European tech shares tumble as China's AI push spooks investors
(Reuters) - 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% as of 0941 GMT, tracking a move lower in global equities. Futures tracking the tech-heavy U.S. Nasdaq Composite tumbled 3.1%.
Chinese startup 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.
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."
Nasdaq futures slump after a cheaper Chinese AI model sparks panic in Silicon Valley.
With only a few days remaining before US President Trump's Feb. 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 around the globe, particularly the policy verdicts from the 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 gross domestic product numbers for the eurozone and Germany, along 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 audio-streaming giant Spotify.
