(Reuters) - Australian stocks that are exposed to the artificial intelligence wave fell sharply on Tuesday as investors feared the emergence of a low-cost AI model from Chinese startup DeepSeek would threaten the dominance of current market leaders.

Shares of AI software firm Appen ( APPEF ) fell 3.3%, while AI chipmaker Brainchip ( BRCHF ) lost 10.3% by 0029 GMT. The technology sub-index was down 1%.

Last week, DeepSeek launched a free AI assistant that it says uses less data at a fraction of the cost of incumbent services. By Monday, the assistant had surpassed U.S. rival ChatGPT in downloads from Apple's app store.

The new model's sudden rise sent global technology stocks crashing overnight, with leader Nvidia ( NVDA ) losing $592.7 billion in market capitalization, the biggest one-day loss for a Wall Street stock, according to data compiled by LSEG.

In Australia, data centre landlords Goodman Group ( GMGSF ), NEXTDC ( NXDCF ) and DigiCo Infrastructure REIT tumbled 6.4%, 6.2% and 11.1%, respectively, as DeepSeek's model sparked concerns of lowered spending on infrastructure.

Australia's data-centre market saw outsized investment last year as the AI boom drove a frenzied demand, with giants such as Nvidia ( NVDA ) pouring billions to build capacity.

"In our view, DeepSeek most likely drives further demand for data centers globally with advanced computational capabilities, high capacity storage, robust networking, energy efficient designs and infrastructure," analysts at Citi said in a note.

Jessica Amir, a market strategist at trading platform Moomoo, said she expects Australians to reassess their exposure to AI and technology after the DeepSeek-induced selloff, and rotate to safe havens such as healthcare and staples.