NEW YORK (AP) — Wall Street's superstars are tumbling Monday as a competitor from China threatens to upend the artificial-intelligence frenzy that's helped them make so much money.
The S&P 500 was down 1.6% in morning trading and heading for its worst day in more than a month. Big Tech stocks took some of the heaviest losses, with Nvidia down 13%, and they dragged the Nasdaq composite down 2.7%.
Stocks outside of AI-related industries held up much better, though, and the Dow Jones Industrial Average was down by just 65 points, or 0.1%, as of 10:27 a.m. Eastern time. The Dow has much less of an emphasis on tech than the S&P 500 and Nasdaq.
The shock to financial markets came from China, where a company called DeepSeek said it had developed a large language model that can compete with U.S. giants but at a fraction of the cost. DeepSeek’s app had already hit the top of Apple’s App Store chart by Monday morning, and analysts said such a feat would be particularly impressive given how the U.S. government has restricted Chinese access to top AI chips.
Skepticism, though, remains about how much DeepSeek’s announcement will ultimately shake the AI supply chain, from the chip makers making semiconductors to the utilities hoping to electrify vast data centers gobbling up computing power.
“It remains to be seen if DeepSeek found a way to work around these chip restrictions rules and what chips they ultimately used as there will be many skeptics around this issue given the information is coming from China,” according to Dan Ives, an analyst with Wedbush Securities.
DeepSeek’s disruption nevertheless rocked stock markets worldwide.
In Amsterdam, Dutch chip supplier ASML slid 7.2%. In Tokyo, Japan’s Softbank Group Corp. lost 8.3% and is nearly back to where it was before leaping on an announcement trumpeted by the White House that it was joining a partnership to invest up to $500 billion in AI infrastructure.
And on Wall Street, shares of Constellation Energy sank 20.3%. The company has said it would restart the shuttered Three Mile Island nuclear power plant to supply power for data centers for Microsoft.
All the worries sent investors toward bonds, which can be safer investments than any stock. The rush sent the yield of the 10-year Treasury down to 4.54% from 4.62% late Friday.
It’s a sharp turnaround for the AI winners, which had soared in recent years on hopes that all the investment pouring into the industry would lead to a possible remaking of the global economy, along with huge profits along the way.
Nvidia’s stock had soared from less than $20 to more than $140 in less than two years before Monday’s drop, for example.
Other Big Tech companies had also joined in the frenzy, and their stock prices had benefited too. It was just on Friday that Meta Platforms CEO Mark Zuckerberg was saying he expects to invest up to $65 billion this year, while talking up a massive data center while talking up a datacenter Meta is building in Louisiana that is so large it would cover a significant part of Manhattan.
Such companies have become so dominant that they've taken the nickname of the “Magnificent Seven.”
In stock markets abroad, movements for indexes across Europe and Asia weren’t as forceful as for the big U.S. tech stocks. France’s CAC 40 fell 0.1%, and Germany’s DAX lost 0.4%.
In Asia, stocks edged 0.1% lower in Shanghai after a survey of manufacturers showed export orders in China dropping to a five-month low.
The Federal Reserve holds its latest policy meeting later this week. Traders don’t expect recent weak data to push the Fed to cut its main interest rate. They’re virtually certain the central bank will hold steady, according to data from CME Group .
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AP Business Writers Matt Ott and Elaine Kurtenbach contributed.
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This story has been corrected. Meta is planning to build a data center in Louisiana, not Manhattan.
