Futures linked to the tech-heavy Nasdaq tumbled Monday as the surging popularity of a low-cost Chinese artificial intelligence model sparked a selloff in chipmaker Nvidia and other companies that stand to benefit from investments into the technology.

Chinese startup DeepSeek has rolled out a free assistant it says uses cheaper chips and less data, seemingly challenging a widespread bet in financial markets that AI will drive demand along a supply chain from chipmakers to data centers.

"It is far too early to describe DeepSeek as an existential threat to U.S.-based AI solutions," said Richard Hunter, head of markets at interactive investor.

"It will almost certainly put the cat among the pigeons as investors scramble to assess the potential damage it could have on a burgeoning industry which has powered much of the gain seen in the main indices over the past couple of years."

DeepSeek's AI Assistant on Monday overtook rival ChatGPT to become the top-rated free application available on Apple's App Store in the United States.

Nvidia, whose chips are the top choice for powering AI applications, dropped 12.3% in premarket trading, while other chipmakers such as Broadcom and Micron Technology fell 14.3% and 8.4%, respectively.

Microsoft and Meta Platforms were down 5.8% and 4.7%. Both are set to report earnings later this week, along with Apple and Tesla.

Google-parent Alphabet fell 4.6%, and Apple lost 0.4%.

AI server makers Dell Technologies and Super Micro Computer slid 8.8% and 10%.

Power companies, which are expected to see a surge in demand from energy-intensive data centers needed to develop AI technology, also slid. Constellation Energy, Vistra , and GE Vernova were down between 12.8% and 16.1%.

The Cboe Volatility Index, known as Wall Street's "fear gauge," hit its highest since Dec.20, last up 6.5 points at 21.34.

At 06:56 a.m. ET, Dow E-minis were down 415 points, or 0.93%, S&P 500 E-minis were down 151.75 points, or 2.47%, and Nasdaq 100 E-minis were down 928.75 points, or 4.24%.

Bucking the wider trend, AT&T rose 1.6% after its fourth-quarter wireless subscriber growth surpassed expectations.

Global markets were also on edge as the U.S. and Colombia pulled back from the brink of a trade war on Sunday after the White House said the South American nation had agreed to accept military aircraft carrying deported migrants.

On the economic radar, the U.S. Federal Reserve's first interest rate decision of the year is expected on Wednesday, with markets widely expecting the central bank to hold its lending rate steady.

The December reading of the personal consumption expenditures (PCE) is due on Friday, a crucial metric in assessing the trajectory of inflation.

Markets have also been weighing Trump's proposed tariffs, which could exacerbate inflationary pressures and slow Fed rate cuts, after he referred to trade policy multiple times last week without providing concrete details of his plans.

All three major indexes clocked weekly gains last week despite a pullback on Friday, with the S&P 500 retreating from all-time highs.

Energy major Exxon Mobil, United Parcel Service and planemaker Boeing are among the industry leaders reporting their quarterly results later this week.