By Nikhil Sharma and Johann M Cherian
(Reuters) - European tech shares came under pressure on Monday, after Chinese tech startup DeepSeek's low-cost artificial intelligence model sparked worries about returns in the AI business and the need for costly chips.
The pan-European STOXX 600 dropped as much as 0.8% earlier in the day, tracking a global market sell-off on concerns about AI investment and tech sector valuations, after DeepSeek rolled out a free assistant that it says uses lower-cost chips and less data. [MKTS/GLOB]
European tech stocks slid 3.4% and were on track for their biggest daily drop since October, with chip equipment maker ASML (AS:ASML) dropping 7% to touch a two-month low and ASM International slumping more than 12%.
Siemens (ETR:SIEGn) Energy and Schneider Electric (EPA:SCHN), which provides electric hardware for AI infrastructure, sank 19.9% and 9.5% respectively and were among the weakest performers on the STOXX 600.
"DeepSeek's success... provides a wake up call and somewhat of a question mark on how much needs to be spent in order to build a model, and whether quite the level of CapEx we have been seeing is really required," said Ben Barringer, technology analyst at Guilter Cheviot.
The selloff comes after the STOXX 600 touched an intra-day record high on Friday and as investors await earnings from U.S. tech giants Apple (NASDAQ:AAPL), Meta, Microsoft (NASDAQ:MSFT) and Tesla (NASDAQ:TSLA) later this week.
Uncertainty around potential U.S. tariffs continues to worry investors, with only a few days remaining before the Feb. 1 deadline President Donald Trump has given for unveiling his trade policy on key trading partners, including the EU.
The STOXX 50 volatility index, an indicator of market anxiety, rose 1.9 points to touch a two-week high.
The week is also packed with interest rate decisions by central banks around the world, particularly the U.S. Federal Reserve and European Central Bank.
Traders have priced in a quarter point cut by the ECB, while they expect the Fed to keep rates steady, according to data compiled by LSEG.
Fourth-quarter gross domestic product numbers for the euro zone and Germany, along with regional inflation data are due during the week.
Bucking the trend, sectors seen less-exposed to business cycle downturns such as food and beverages and utilities added 2.1% and 0.8%, respectively, while chemical company stocks advanced 2% following brokerage JP Morgan's bullish upgrade.
Ryanair (NASDAQ:RYAAY) added 3.2% after the carrier posted a bigger-than-expected quarterly profit.
UMG (AS:UMG) jumped 7.3% after the world's biggest music label announced a new agreement with Spotify.
Swiss testing and inspection group SGS (SIX:SGSN) jumped 4.7% after ending potential merger talks with French rival Bureau Veritas.