Nasdaq plunges more than 3% with losses in tech stocks amid China's AI boost.

Reuters - The Nasdaq index fell more than 3% on Monday, as the popularity of a low-cost Chinese artificial intelligence model triggered a sell-off in AI-related stocks on Wall Street, with megacap stocks, including Nvidia, being the hardest hit.

The Chinese startup DeepSeek has launched a free assistant that, according to the company, uses low-cost chips and less data, seemingly challenging a widespread assumption in the markets that AI will drive demand along a supply chain, from chip manufacturers to data centers.

“It’s too early to describe DeepSeek as an existential threat to US-based AI solutions,” said Richard Hunter, director of markets at interactive investor.

"It's almost certain that this will put the cat among the pigeons, as investors scramble to assess the potential damage this could cause to a booming sector that has driven much of the gains seen in major indexes over the past two years."

On Monday, DeepSeek's AI Assistant surpassed rival ChatGPT to become the highest-rated free app available on Apple's App Store in the United States.

Nvidia fell 6,9% in pre-market trading, while chipmakers AMD and Micron Technology declined 3,7% and 6,4%, respectively.

Microsoft and Meta each fell 3,3%. Both will release their quarterly results this week, along with Apple and Tesla.

Alphabet, Google's parent company, was down 3,2%, and Apple was down 1,4%.

S&P 500 futures were down 2,57%, while Nasdaq 100 futures were down 4,57%, and Dow Jones futures were down 0,81%.

Furthermore, adding some caution to global markets, the US and Colombia narrowly avoided a trade war on Sunday after the White House said the South American country had agreed to accept military aircraft carrying deported migrants.

On Wednesday, the Federal Reserve will announce its decision on interest rates, with markets widely expecting the US central bank to keep the lending rate stable.