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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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Futures slide: Dow 0.93%, S&P 500 2.47%, Nasdaq 4.24%

(Updates with results from AT&T ( T ))

By Shashwat Chauhan and Sukriti Gupta

Jan 27 (Reuters) - Futures linked to the tech-heavy

Nasdaq tumbled on Monday as the surging popularity of a low-cost

Chinese artificial intelligence model sparked a selloff in

chipmaker Nvidia ( NVDA ) and other companies that stand to benefit 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.

"It is far too early to describe DeepSeek as an existential

threat to U.S.-based AI solutions," said Richard Hunter, head of

markets at interactive investor.

"It will almost certainly put the cat among the pigeons as

investors scramble to assess the potential damage it could have

on a burgeoning industry which has powered much of the gain seen

in the main indices over the past couple of years."

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.

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

AI applications, dropped 12.3% in premarket trading, while other

chipmakers such as Broadcom ( AVGO ) and Micron Technology ( MU )

fell 14.3% and 8.4%, respectively.

Microsoft ( MSFT ) and Meta Platforms ( META ) were down

5.8% and 4.7%. Both are set to report earnings later this week,

along with Apple ( AAPL ) and Tesla.

Google-parent Alphabet fell 4.6%, and Apple ( AAPL ) lost

0.4%.

AI server makers Dell Technologies ( DELL ) and Super Micro

Computer ( SMCI ) slid 8.8% and 10%.

Power companies, which are expected to see a surge in

demand from energy-intensive data centers needed to develop AI

technology, also slid. Constellation Energy ( CEG ), Vistra ( VST )

, and GE Vernova ( GEV ) were down between 12.8% and

16.1%.

The Cboe Volatility Index, known as Wall Street's

"fear gauge", hit its highest since Dec.20, last up 6.5 points

at 21.34.

At 06:56 a.m. ET, Dow E-minis were down 415 points,

or 0.93%, S&P 500 E-minis were down 151.75 points, or

2.47%, and Nasdaq 100 E-minis were down 928.75 points,

or 4.24%.

Bucking the wider trend, AT&T ( T ) rose 1.6% after its

fourth-quarter wireless subscriber growth surpassed

expectations.

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's first

interest rate decision of the year is expected on Wednesday,

with markets widely expecting the central bank to hold its

lending rate steady.

The December reading of the personal consumption

expenditures (PCE) is due on Friday, a crucial metric in

assessing the trajectory of inflation.

Markets have also been weighing Trump's proposed tariffs,

which could exacerbate inflationary pressures and slow Fed rate

cuts, after he referred to trade policy multiple times last week

without providing concrete details of his plans.

All three major indexes clocked weekly gains last week

despite a pullback on Friday, with the S&P 500 retreating

from all-time highs.

Energy major Exxon Mobil ( XOM ), United Parcel Service ( UPS )

and planemaker Boeing ( BA ) are among the industry

leaders reporting their quarterly results later this week.

(Reporting by Shashwat Chauhan and Sukriti Gupta in Bengaluru;

Editing by Shounak Dasgupta and Devika Syamnath)