Semiconductor stocks and other artificial intelligence-related names sold off sharply at the start of the new trading week after Chinese AI lab DeepSeek launched a new version of its artificial language model. Market assumptions about the huge cost of the AI revolution and demand for semiconductors are hastily being revised as China seeks to disrupt the US dominance of this space.
The news has potentially significant implications across a range of stocks, from semiconductor stock designers and makers to utilities that were seen as benefiting from booming electricity demand to power data centers.
US Semiconductor Stocks Slide
European Chipmaker Stocks Slump
European semiconductor stocks such as ASML ASML, BE Semiconductor Industries BSI and ASM International ASM all fell sharply in trading on Monday. In New York, shares in Nvidia NVDA, Broadcom AVGO and Arm Holdings ARM, all closed down sharply. Tech-focused indexes also dropped.
At the European market close, ASML was down 7%, BE Semiconductor lost 11% and ASM fell 12%.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.”
European Tech ETFs Slide Too
European-listed ETFs exposed to the sector also fell on the developments such as Xtrackers Artificial Intelligence & Big Data XAIX, WisdomTree Artificial Intelligence WTAI and Amundi MSCI Semiconductors ESG-Screened SEMG.
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.”
Hope for Less Power-Hungry AI Weighs on Grid Companies
“Shares in Siemens Energy ENR have fallen 20%, part of a broader sell-off for companies with exposure to electricity consumption and AI,” Morningstar analyst Matthew Donen said.
News about DeepSeek “has raised questions about the true cost of AI models, which initially appeared to be extremely energy-intensive”, he said.
“Should the cost decline, as DeepSeek’s model implies, the market’s expectations of electricity consumption will decline. Siemens Energy benefits from increasing electricity consumption through the sales of its gas turbines and high-voltage electricity equipment.”
French electrical infrastructure groups Legrand LR and Schneider Electric SU closed down 7% and 9%.
And in the US, energy stocks Vistra VST, GE Vernova GEV and Constellation Energy CEG all slumped amid downgraded assumptions about the energy consumption demands of AI.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar's editorial policies.
