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Ryanair up after bigger-than-expected Q3 profit
JP Morgan upgrades chemical sector to overweight
UMG jumps on new Spotify deal
STOXX ends flat
Updates with closing levels
By Nikhil Sharma and Johann M Cherian
Jan 27 (Reuters) - European tech shares came under pressure on Monday, after Chinese tech startup DeepSeek's low-cost artificial intelligence model sparked worries about returns in the AI business and the need for costly chips.
The pan-European STOXX 600 .STOXX dropped as much as 0.8% earlier in the day, tracking a global market sell-off on concerns about AI investment and tech sector valuations, after DeepSeek rolled out a free assistant that it says uses lower-cost chips and less data. MKTS/GLOB
European tech stocks .SX8P slid 3.4% and were on track for their biggest daily drop since October, with chip equipment maker ASML ASML.AS dropping 7% to touch a two-month low and ASM International ASMI.AS slumping more than 12%.
Siemens Energy ENR1n.DE and Schneider Electric SCHN.PA, which provides electric hardware for AI infrastructure, sank 19.9% and 9.5% respectively and were among the weakest performers on the STOXX 600.
"DeepSeek's success... provides a wake up call and somewhat of a question mark on how much needs to be spent in order to build a model, and whether quite the level of CapEx we have been seeing is really required," said Ben Barringer, technology analyst at Guilter Cheviot.
The selloff comes after the STOXX 600 touched an intra-day record high on Friday and as investors await earnings from U.S. tech giants Apple AAPL.O, Meta META.O, Microsoft MSFT.O and Tesla TSLA.O later this week.
Uncertainty around potential U.S. tariffs continues to worry investors, with only a few days remaining before the Feb. 1 deadline President Donald Trump has given for unveiling his trade policy on key trading partners, including the EU.
The STOXX 50 volatility index .V2TX, an indicator of market anxiety, rose 1.9 points to touch a two-week high.
The week is also packed with interest rate decisions by central banks around the world, particularly the U.S. Federal Reserve and European Central Bank.
Traders have priced in a quarter point cut by the ECB, while they expect the Fed to keep rates steady, according to data compiled by LSEG.
Fourth-quarter gross domestic product numbers for the euro zone and Germany, along with regional inflation data are due during the week.
Bucking the trend, sectors seen less-exposed to business cycle downturns such as food and beverages .SX3P and utilities .SX6P added 2.1% and 0.8%, respectively, while chemical company stocks .SX4P advanced 2% following brokerage JP Morgan's bullish upgrade.
Ryanair RYA.I added 3.2% after the carrier posted a bigger-than-expected quarterly profit.
UMG UMG.AS jumped 7.3% after the world's biggest music label announced a new agreement with Spotify SPOT.N.
Swiss testing and inspection group SGS SGSN.S jumped 4.7% after ending potential merger talks with French rival Bureau Veritas BVI.PA.
(Reporting by Nikhil Sharma and Johann M Cherian; Editing by Savio D'Souza, Tasim Zahid and Jane Merriman)
((Nikhil.Sharma@thomsonreuters.com;))
