Global markets faced a volatile session Monday as fears of escalating competition from Chinese artificial intelligence startup DeepSeek led to a sharp sell-off in technology and energy stocks. The Stoxx 600 index closed down 0.07%, while shares of Siemens Energy nosedived nearly 20%, driving investor concerns over the resilience of Europe’s AI supply chain.

The downturn followed news that DeepSeek had launched an open-source AI model reportedly developed for under $6 million—a fraction of the costs Western tech giants incur. With its model outperforming leading AI systems like OpenAI’s ChatGPT in multiple benchmarks, the announcement raised doubts about the U.S. and Europe’s ability to maintain dominance in advanced AI technologies.

Tech Stocks Lead Losses

Technology stocks were the worst-performing sector in Europe, shedding 1.5% overall. Semiconductor manufacturers ASML and ASM International saw their shares drop 7% and 12%, respectively, while data center infrastructure providers like Schneider Electric and Prysmian fell between 8% and 12%.

Siemens Energy’s 20% decline reflected heightened concerns, as the company relies on Nvidia GPUs to power its AI-driven grid innovations. “This is a wake-up call for Western firms betting heavily on AI infrastructure,” said Nigel Green, CEO of financial advisory deVere Group. “DeepSeek’s success highlights a shift in the global tech arms race.”

Asia and U.S. Markets Echo AI Anxiety

The ripple effects extended beyond Europe. Japan’s Tokyo Electron and Advantest both dropped sharply, while Hong Kong markets traded cautiously higher as investors evaluated China’s industrial data. Across the Atlantic, the Nasdaq Composite slid 2.7%, led by Nvidia’s 15.8% drop—marking its worst single-day performance since March 2020.

DeepSeek’s groundbreaking AI model has sparked speculation about the feasibility of producing competitive systems on minimal budgets. While analysts at Citi acknowledge DeepSeek’s cost advantage, they caution that access to advanced GPUs, dominated by Nvidia, remains a key barrier to entry for new players.

Central Banks and Earnings in Focus

Meanwhile, European traders are bracing for a busy week ahead. The European Central Bank’s upcoming interest rate decision and the release of GDP data from France and Germany loom large. Major corporations, including LVMH, Shell, ASML, and Deutsche Bank, are set to report earnings later this week, adding further market-moving potential.

Broader Market Sentiment

Beyond AI-related stocks, Ryanair offered a rare bright spot, closing up 3.3% after reporting better-than-expected quarterly profits. However, the airline tempered its 2026 passenger growth forecast, citing ongoing delays in Boeing deliveries.

Elsewhere, gold prices surged 1% to near record highs, with spot gold trading at $2,781.66 per ounce. The precious metal benefited from lingering uncertainty surrounding U.S.-China trade relations and interest rate policy.

Analyst Outlook

While DeepSeek’s breakthrough challenges existing paradigms, Bernstein analysts tempered panic, noting that its $6 million price tag likely excluded earlier R&D expenses. “The AI infrastructure complex isn’t collapsing—it’s adapting,” they wrote in a client note, urging patience as Western tech giants recalibrate their strategies.

As the AI race heats up, the stakes have never been higher. Whether Western firms can leverage their technological advantages or succumb to rising competition from China remains an open question.