Stock market hemorrhages $1TRILLION as Nasdaq drops 4% on fears China is winning AI arms race

Wall Street indexes sank as much as four percent in premarket trading on Monday after a Chinese artificial intelligence startup triggered fears America's top tech stocks are overvalued. 

Investors dumped around $1 trillion of technology stocks in premarket trading sending the S&P 500 2.3 percent lower before the bell.

The tech-heavy Nasdaq has been hit harder, tumbling 3.9 percent before markets open at 9:30am. 

Chinese artificial intelligence startup DeepSeek demonstrated a chatbot that it says rivals the top versions from OpenAI and Google for a fraction of the cost.

Chipmaker Nvidia, which has benefitted from the AI frenzy over the last eighteen months, fell around 12 percent in early trading. 

Another US chipmaker Broadcom also lost around 12 percent while software giant Oracle lost 8 percent.

Microsoft slid more than 6 percent and Amazon was down 4.5 percent.

Google parent company Alphabet and Facebook parent Meta each lost about 3.5 percent.

DeepSeek's advances have raised doubts about whether the US will retain its lead in the global race of advancing AI technology. 

The Chinese company released its free AI Assistant last week which it says uses less Nvidia chips at a fraction of the cost of current models on the market. 

DeepSeek overtook its rival ChatGPT to become the most-downloaded free application available on the Apple Store in the US on Monday.