Europe midday: Tech stocks hit on DeepSeek AI model challenge

(Sharecast News) - European shares were sharply lower on Monday with tech stocks on the decline as a Chinese artificial intelligence company said it would launch a cheaper assistant. The pan-regional Stoxx 600 index was down 0.54% to 527.2 after hitting fresh records last week. Germany's DAX was 1.03% lower at 21,164 despite a survey showing business sentiment unexpectedly improved a little in January but companies remained pessimistic.

The business climate index rose to 85.1 from 84.7 in December, coming in above consensus expectations for it to remain unchanged, the Ifo Institute said.

The expectations index dipped to 84.2 in January from 84.4 the month before, while the current conditions index ticked up to 86.1 from 85.1.

"Last week wrapped up with a striking contrast: bullish momentum through most of the week gave way to a bearish close on Friday. Donald Trump's smooth inauguration and a bold $500bn AI infrastructure pledge fueled market optimism," said Swissquote Bank analyst Ipek Ozkardeskaya.

"However, the narrative shifted dramatically as Friday's PMI data exceeded expectations across the US and Europe. The stronger-than-anticipated economic indicators tempered hopes for Federal Reserve rate cuts, which had been bolstered by Trump's earlier calls for lower interest rates."

"A set of stronger-than-expected PMI data prompted investors to recalibrate their Fed outlook, weighing stronger economic growth against the likelihood of a more hawkish Fed response."

Sentiment was also rattled by news that Chinese startup DeepSeek had launched a free artificial intelligence assistant it claimed uses lower-cost chips and less data.

The news hit chip makers ASM, ASML and BE Semiconductor. Siemens Energy, which provides electric hardware for AI infrastructure, plunged more than 14%, while other AI-exposed firms such as Schneider Electric and Munters Group were also hit hard.

In other equity news, budget carrier Ryanair gained after posting better-than-expected third-quarter profit and despite another cut in passenger number projections due to delays in Boeing aircraft delivery.

Reporting by Frank Prenesti for Sharecast.com