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Wall Street's 'fear gauge' at its highest since Dec. 20

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Nvidia ( NVDA ) falls after China's DeepSeek sparks AI market rout

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AT&T ( T ) rises on upbeat Q4 wireless subscriber growth

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Indexes slide: Dow 0.28%, S&P 500 1.77%, Nasdaq 3.04%

(Updates after markets open)

By Shashwat Chauhan and Sukriti Gupta

Jan 27 (Reuters) - The S&P 500 and the Nasdaq hit over

one-week lows on Monday, as the surging popularity of a low-cost

Chinese artificial intelligence model knocked shares of

chipmaker Nvidia ( NVDA ) and other companies benefiting from investments

into the technology.

Chinese startup DeepSeek has rolled out a free assistant it

says uses cheaper chips and less data, seemingly challenging a

widespread bet in financial markets that AI will drive demand

along a supply chain from chipmakers to data centers.

DeepSeek's AI Assistant on Monday overtook rival ChatGPT to

become the top-rated free application available on Apple's ( AAPL ) App

Store in the United States.

Investors are likely to question whether DeepSeek's

developments have the potential to really disrupt the industry,

said Adam Sarhan, CEO of 50 Park Investments.

"If it is something that can, then we have a situation where

all these AI stocks and the market as a whole will be

re-priced."

Nvidia ( NVDA ), whose chips are the top choice for powering

AI applications, dropped 11.7%, while a gauge of semiconductor

stocks dropped 6.5%.

Eight of the 11 S&P 500 sectors were in the red, with

technology stocks leading declines with a 4.5% fall.

Microsoft ( MSFT ), Meta Platforms ( META ) and

Google-parent Alphabet fell between 2.2% and 3.5%,

while AI server makers Dell Technologies ( DELL ) and Super

Micro Computer ( SMCI ) slid 7.2% and 8.9%.

Power companies, which are expected to see a surge in demand

from energy-intensive data centers needed to develop AI

technology, also came under pressure. Vistra ( VST ) and GE

Vernova ( GEV ) were the worst hit, tumbling about 20% each.

The Cboe Volatility Index, known as Wall Street's

"fear gauge", hit its highest since Dec. 20, last up 4.57 points

at 19.42.

At 09:43 a.m. ET, the Dow Jones Industrial Average

fell 125.18 points, or 0.28%, to 44,299.07, the S&P 500

lost 108.20 points, or 1.77%, to 5,993.04 and the Nasdaq

Composite lost 606.43 points, or 3.04%, to 19,347.87.

Bucking the wider trend, AT&T ( T ) rose 6.5% to an over

three-year high after its fourth-quarter wireless subscriber

growth surpassed expectations.

Big Tech will remain in focus, as Microsoft ( MSFT ), Meta, Apple ( AAPL )

and Tesla - four out of the "Magnificent 7"

companies that powered the bulk of last year's gains - are set

to report quarterly numbers later this week.

Global markets were also on edge as the U.S. and Colombia

pulled back from the brink of a trade war on Sunday after the

White House said the South American nation had agreed to accept

military aircraft carrying deported migrants.

On the economic radar, the U.S. Federal Reserve is widely

expected to hold its lending rate steady in its first

interest-rate decision of the year due on Wednesday, while the

December reading of the personal consumption expenditures (PCE)

is scheduled for Friday.

Declining issues outnumbered advancers by a 1.13-to-1 ratio

on the NYSE and by a 1.3-to-1 ratio on the Nasdaq.

The S&P 500 posted 16 new 52-week highs and no new lows

while the Nasdaq Composite recorded 15 new highs and 40 new

lows.