U.S. stock markets are bracing for a rough start this week, with premarket trading pointing to sharp declines. The slump is largely fueled by worries over China’s rapid progress in artificial intelligence, which could challenge the dominance of American tech giants.

DeepSeek, a Chinese AI company, has made headlines by developing chatbots that rival top U.S. systems—and they’re doing it with far fewer specialized chips. This breakthrough has investors second-guessing the sky-high valuations of chipmakers like Nvidia, which has been a key player in powering advanced AI systems. Companies like Google, Meta, and OpenAI are also feeling the heat as their massive AI investments face new uncertainties.

Futures for the S&P 500 were down over 2%, while the tech-heavy Nasdaq dropped more than 4% in premarket trading. Nvidia, a leading chipmaker, saw its shares plummet by over 10%, wiping out hundreds of billions in market value. Other semiconductor firms like AMD and equipment specialists like ASML followed suit with similar declines.

Experts suggest that China’s advances in AI are a wake-up call for U.S. tech leaders. As global competition heats up, companies like Nvidia might not remain at the forefront forever. Investors are now reconsidering their long-term bets on the AI boom, worried that the playing field could shift dramatically.

The market’s reaction underscores just how much is at stake in the AI race, with even small breakthroughs shaking confidence in trillion-dollar industries. For now, all eyes are on how U.S. firms will respond to this new challenge from across the Pacific.