The launch of DeepSeek’s latest AI model was the catalyst for a tech stock selloff as markets adjust to the idea that the AI revolution will be significantly less capital intensive. Monday’s selloff comes after a multi-year bull run for AI stocks.
Dutch semiconductor stock ASML lost nearly 9% in Monday morning trading in Amsterdam, while BE Semiconductor Industries BSI is down more than 11%. Shares in ASM International ASM are down by 13%. Shares in Arm Holdings ARM, a UK-based company that is listed in New York, were also down nearly 10% in pre-market trading.
Why Are AI Stocks Moving?
“European semiconductor stocks with AI exposure, mainly ASML, ASM, and ARM, are down in the 7% to 10% range as DeepSeek’s AI models challenge the traditional cost assumptions of AI training and inferencing,” said Javier Correonero, equity analyst at Morningstar.
“The investment case for the AI supply chain until now was that more spending led to better outcomes for AI models. Big tech firms Microsoft, Google, Amazon and Meta have deployed hundreds of billions to purchase GPUs from Nvidia and ensure chip supply to satisfy the insatiable demand for AI.”
Pre-market declines of US tech stocks were led by Nvidia NVDA, down 11.7% as of 1:00pm UK time. Microsoft MSFT declined 5.9%, Google owner Alphabet GOOGL declined 3.5% and Meta META slid 3.2% lower.
European-listed ETFs exposed to the sector also fell on the developments: Xtrackers Artificial Intelligence & Big Data UCITS ETF 1C is down 3.7% and WisdomTree Artificial Intelligence UCITS ETF is 5% down. Meanwhile, Amundi MSCI Semiconductors ESG-Screened ETF Acc was, for example, down 9.2%.
Morningstar thematic ETF expert Kenneth Lamont explains how DeepSeek could signal a move away from “brute-force computing power” and rewrite the investment case for AI.
“Until now, the conventional wisdom has been clear: The best AI models rely on massive datasets and immense computational power, rewarding scale and favoring hardware giants like Nvidia and Europe’s ASML. But DeepSeek’s latest innovations are turning that assumption on its head.
“The start-up’s new models demonstrate how efficiency gains in AI development can reduce reliance on brute-force computing power. This breakthrough slashes computational demands, enabling lower fees—and putting pressure on industry titans like Microsoft and Google to justify their premium pricing.”
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.
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