LONDON/SINGAPORE, Jan 27 (Reuters) - Investors hammered

technology stocks on Monday, sending the likes of Nvidia ( NVDA )

and Oracle plummeting, as the emergence of a

low-cost Chinese artificial intelligence model cast doubts on

Western companies' dominance in this sector.

Startup DeepSeek last week launched a free assistant it says

uses less data at a fraction of the cost of incumbent players'

models, possibly marking a turning point in the level of

investment needed for AI.

Futures on the Nasdaq 100 slid almost 4%, suggesting

the index could see its biggest daily slide since September 2022

later on, if those losses are sustained. Those on the S&P 500

dropped 2%. Shares in AI chipmaker Nvidia ( NVDA ) fell 10%, rival

Oracle dropped 8% and AI data analytics company Palantir ( PLTR )

lost 7% in pre-market trading.

DeepSeek, which by Monday had overtaken U.S. rival ChatGPT

in terms of downloads on the Apple Store, offers the prospect of

a viable, cheaper AI alternative which has raised questions

about the sustainability of the level of spending and investment

on AI by Western companies, including Apple ( AAPL ) and

Microsoft ( MSFT ).

From Tokyo to Amsterdam, shares in AI players tumbled.

"We still don't know the details and nothing has been 100%

confirmed in regards to the claims, but if there truly has been

a breakthrough in the cost to train models from $100 million+ to

this alleged $6 million number this is actually very positive

for productivity and AI end users as cost is obviously much

lower meaning lower cost of access," Jon Withaar, a senior

portfolio manager at Pictet Asset Management, said.

The hype around AI has powered a huge inflow of capital into

the equity markets in the last 18 months in particular, as

investors have bought into the technology, inflating company

valuations and sending stock markets to record highs.

Little is known about the small Hangzhou startup behind

DeepSeek. Its researchers wrote in a paper last month that the

DeepSeek-V3 model, launched on Jan. 10, used Nvidia's ( NVDA ) H800 chips

for training, spending less than $6 million - the figure

referenced by Pictet's Withaar.

H800 chips are not top-of-the-line. Initially developed as a

reduced-capability product to get around restrictions on sales

to China, they were subsequently banned by U.S. sanctions.

'SPUTNIK MOMENT'

Marc Andreessen, the Silicon Valley venture capitalist, said

in a post on X on Sunday that DeepSeek's R1 model was AI's

"Sputnik moment", referencing the former Soviet Union's launch

of a satellite that marked the start of the space race in the

late 1950s.

"Deepseek R1 is one of the most amazing and impressive

breakthroughs I've ever seen - and as open source, a profound

gift to the world," he said in a separate post.

In Europe, ASML which counts Taiwan's TSMC

, Intel ( INTC ) and Samsung as its

customers, dropped almost 11%, while in Japan, startup investor

SoftBank Group slid more than 8%. Last week it

announced a $19 billion commitment to fund Stargate, a

data-centre joint venture with OpenAI.

Big Tech has ramped up spending on developing AI

capabilities and optimism over the possible returns has driven

stock valuations sky-high.

Nvidia ( NVDA ) alone has risen by over 200% in about 18 months and

trades at 56 times the value of its earnings, compared with a

53% rise in the Nasdaq, which trades at a multiple of 16

to the value of its constituents' earnings, according to LSEG

data.

Nick Ferres, chief investment officer at Vantage Point Asset

Management in Singapore said the market was questioning the

capex spend of the major tech companies.

Masahiro Ichikawa, chief market strategist at Sumitomo

Mitsui DS Asset Management said: "The idea that the most

cutting-edge technologies in America, like Nvidia ( NVDA ) and ChatGPT,

are the most superior globally, there's concern that this

perspective might start to change."

"I think it might be a bit premature," Ichikawa said.

(Additional reporting by Tom Westbrook and Ankur Banerjee in

Singapore; Graphics by Dhara Ranasinghe and Amanda Cooper;

Editing by Gerry Doyle and Jane Merriman)