A jolt of panic hit big technology stocks on Monday, with investors rattled by fears that advances in artificial intelligence by Chinese upstarts could threaten the moneymaking power of tech giants in the United States, Europe and beyond.

Nvidia was one of the hardest hit, plunging 17%, a move that erased hundreds of billions of dollars in market value in a stroke.

The Chinese AI company DeepSeek has made waves by matching the abilities of cutting-edge chatbots while using a fraction of the specialized computer chips that leading AI companies rely on. That has prompted investors to rethink the large returns implied by the heady valuations of companies like Nvidia, whose equipment powers the most advanced AI systems, as well as the enormous investments that companies like Google, Meta and OpenAI are making to build their AI businesses.

U.S. markets tumbled, with the S&P 500 falling nearly 2% and the tech-heavy Nasdaq dropping about 3%. Tech stocks also dented market indexes in Europe and Japan.

The pain was concentrated at companies at the forefront of the AI boom, including the multitrillion-dollar behemoths that drove the largest back-to-back annual gains for U.S. markets since the 1990s. Investors have fretted about whether the rally has gone too far, leaving little room for error at the small group of tech firms that now dominates the market.

For those waiting for something to shake the faith in tech valuations, DeepSeek could be the start of a new phase in how investors think about AI, said Steve Sosnick, chief strategist at Interactive Brokers. He called it a “big slap in the face” for investors that could reset the way they calculate risk.

In addition to Nvidia, other chipmakers like Arm, Broadcom and Micron, and semiconductor equipment specialists like ASML recorded substantial declines.

DeepSeek unveiled its new system last month but grabbed the tech world’s attention late last week with a research paper detailing how it built the technology. That “serves as a reminder that competition in the global AI arena is intensifying, and Nvidia may not be in the pole position forever,” Charu Chanana, chief investment strategist at Saxo Bank, wrote in a research note.

DeepSeek’s chatbot rose to the most-downloaded free app in Apple’s App Store in the United States on Monday, overtaking OpenAI’s ChatGPT.

Shares of Google’s parent Alphabet and Microsoft, which have bet heavily on AI, fell 3% on Monday. Oracle, which is a partner in a joint venture with OpenAI and SoftBank unveiled at an event with President Donald Trump last week, dropped 13%. SoftBank shed more than 8% during trading in Tokyo.

Some tech giants bucked the trend. Meta, which last week announced a big jump in its spending plans for data centers, wobbled in early trading before posting a small gain. Apple, which was relatively late to enter the AI arms race, rose more than 3%.

The U.S. tech sector overall has had a rocky start to the year, losing about 4% of its value, while every other major sector has gained over the same period. Because of the tech industry’s size and influence, this has weighed on the S&P 500 index, which is up about 2% for the year.

The recent upheaval casts a cloud over the tech giants as Meta, Microsoft and others prepare to present their latest quarterly earnings this week.

The New York Times has sued OpenAI and its partner, Microsoft, claiming copyright infringement of news content related to AI systems. The two tech companies have denied the suit’s claims.