European Tech Sector Tumbles Amid Low-Cost AI Concerns

European shares dropped as the technology sector faced pressure due to China's upgraded low-cost AI model, raising concerns about rivals’ profits. Tech stocks, including chipmakers and AI infrastructure firms, fell sharply. The selloff precedes upcoming US tech earnings and key interest rate decisions by major central banks.

European shares were under pressure on Monday, as the region's technology sector was hit hard following concerns over China's introduction of a cost-effective AI model. This development stirred apprehension over the potential profit erosion for rival firms reliant on pricier chips.

The pan-European STOXX 600 reported a 0.6% downturn, while futures linked to the Nasdaq Composite in the U.S. fell sharply by 3.1%. DeepSeek, a Chinese startup, has released an assistant operating on cost-efficient chips, posing a challenge to existing market assumptions about AI-driven demand.

These anxieties weighed heavily on the European tech index, which plummeted 5.8%. Key players like ASML and ASM International faced significant losses, with plunges of 11.5% and over 15%, respectively. Siemens Energy and Schneider Electric, also AI-exposed, experienced notable declines.

(With inputs from agencies.)