German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, January 21, 2025. REUTERS/Staff/File Photo Purchase Licensing Rights, opens new tab
- AI-linked stocks experience steep fall
- Ryanair up after bigger-than-expected Q3 profit
- UMG jumps on new Spotify deal
- AI-linked stocks experience steep losses
- STOXX down 0.6%
Jan 27 (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.
The news rattled European tech index
, which slid 5.8% and was on track for its worst day since October 15.
Chip equipment maker ASML
slid 11.5% to a near nine-week low, while ASM International
slumped over 15%.
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.”
The selloff also comes ahead of major tech earnings on Wall Street, with trillion-dollar firms like Apple
, Meta
, Microsoft
and Tesla
expected to post their quarterly earnings this week that should justify their overblown valuations.
With only a few days remaining before the U.S. 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 U.S. 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 euro zone 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
.
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Reporting by Nikhil Sharma; Editing by Savio D’Souza and Tasim Zahid
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