The Japan Times - Nasdaq slumps on Chinese AI upstart, Nvidia loses some $400 bn in value

DeepSeek, which was developed by a start-up based in the eastern Chinese city of Hangzhou, has shown the ability to match the capacity of AI pace-setters such as Nvidia, which sank more than 11 percent Monday, giving up some $400 billion in market value.

The tech-rich Nasdaq led major indices lower, falling 2.7 percent, with AI players Meta, Microsoft and Google parent Alphabet all firmly lower.

DeepSeek said they spent only $5.6 million developing their model -- peanuts when compared with the billions US tech giants have poured into AI.

US "tech dominance is being challenged by China," said Kathleen Brooks, research director at XTB. "The focus is now on whether China can do it better, quicker and more cost effectively than the US, and if they could win the AI race."

Meta and Microsoft are among the tech giants scheduled to report earnings later this week, offering opportunity for comment on the emergence of the Chinese company, likened by venture capitalist Marc Andreessen to a "Sputnik moment," when the Soviet Union shocked Washington with its 1957 launch of a satellite into orbit.

"DeepSeek's AI assistant is now the top-rated free application on Apple's US App Store," said a note from David Morrison, senior market analyst at FCA.

"Investors have been forced to reconsider the outlook for capital expenditure and valuations given the threat of discount Chinese AI models. These appear to be as good, if not better, than US versions."

Earlier, European and Asian stock markets mostly slid as markets also digested the latest tariff back-and-forth involving US President Donald Trump and Colombia.

- SoftBank sinks -

Just last week following his inauguration, Trump announced a $500 billion venture to build infrastructure for AI in the United States.

Tech and chip firms were among the big losers in Tokyo on Monday as the Nikkei ended in negative territory, with Advantest down more than eight percent and Tokyo Electron off almost five percent.

SoftBank, which is a key investor in Trump's AI project, tumbled more than eight percent.

Besides tech earnings, this week also sees interest-rate decisions from the Federal Reserve and European Central Bank, ahead of American inflation data.

Equities enjoyed a healthy run-up last week on the hope that Trump's second administration would take a less hardball approach to global trade. However, his threat Sunday that he would hit Colombian goods with a 25 percent tariff -- rising to 50 percent next week -- and revoke the visas of government officials set off alarm bells.

The move came after President Gustavo Petro blocked deportation flights from the United States.

In response to Trump's decision, Petro initially announced retaliatory levies of 25 percent on imports from the United States.

But Bogota later backed down and agreed to accept the deported citizens, with Foreign Minister Luis Gilberto Murillo saying they had "overcome the impasse."

- Key figures around 1450 GMT -

New York - Dow: DOWN 0.3 percent at 44,271.66

New York - S&P 500: DOWN 1.7 percent at 6,000.18

New York - Nasdaq: DOWN 2.7 percent at 19,415.06

London - FTSE 100: DOWN 0.1 percent at 8,495.07

Paris - CAC 40: DOWN 0.4 percent at 7,899.44

Frankfurt - DAX: DOWN 0.7 percent at 21,237.11

Tokyo - Nikkei 225: DOWN 0.9 percent at 39,565.80 (close)

Hong Kong - Hang Seng Index: UP 0.7 percent at 20,197.77 (close)

Shanghai - Composite: DOWN 0.1 percent at 3,250.60 (close)

Euro/dollar: UP at $1.0510 from $1.0497 on Friday

Pound/dollar: UP at $1.2499 from $1.2484

Dollar/yen: DOWN at 154.29 yen from 156.00 yen

Euro/pound: UP at 84.09 pence from 84.08 pence

Brent North Sea Crude: DOWN 0.2 percent at $78.30 per barrel

West Texas Intermediate: DOWN 0.4 percent at $74.40 per barrel

K.Inoue--JT