On Monday, European shares experienced a downturn as the technology sector joined a broader market retreat. This slump followed the rollout of a new, upgraded low-cost artificial intelligence model from China, raising concerns over potential profit margins for competitors and highlighting the increasing costs associated with advanced technology.

The pan-European STOXX 600 index slid by 0.7% as of 0815 GMT. U.S. markets mirrored this downtrend, with Nasdaq Composite futures plummeting by 3.1% and S&P 500 futures falling by 1%. Contributing to the shakeup, startup DeepSeek released a free AI assistant using economical chips and less data, challenging recent financial assumptions about AI demand’s global supply chain reverberations.

This news caused a ripple effect in European tech stocks, which dropped by 4.5%. Among the hardest hit were chip equipment manufacturer ASML, down 8.7%, along with Siemens Energy and Schneider Electric, dropping 17.7% and 8.1% respectively. As the week progresses, markets are set to watch for central bank rate announcements and crucial GDP and inflation data from major European economies.

(With inputs from agencies.)