CANADA STOCKS-TSX declines as China's low-cost AI model rattles tech investors

Updates with market opening prices

By Ragini Mathur

Jan 27 (Reuters) - Canada's main stock index fell on Monday, as investors shaken by the rising popularity of a Chinese discount artificial intelligence model sold AI-linked stocks.

The Toronto Stock Exchange's S&P/TSX composite index .GSPTSE was down 0.7% at 25,292.46, after nine successive sessions of gains.

Canada's information technology .SPTTTK sector declined 2%, dragged by a 15.4% drop in electronics firm Celestica CLS.TO.

Metal mining .GSPTTMT shares also fell 1.8%, tracking losses in gold prices.GOL/

But capped communication .GSPTTTS shares helped limit the losses by rising over 1%.

Chinese startup DeepSeek launched a free AI assistant last week, claiming it uses cheaper chips and less data. The model's popularity caused global investors to grow skeptical of the profitability of rivals that have invested heavily in AI.

"It's basically caused the market to call into question everything that we thought about AI, like: we need the more powerful chips, we need a lot of energy," said Allan Small, senior investment advisor at Allan Small Financial Group with iA Private Wealth.

Wall Street's tech-heavy Nasdaq .IXIC sank 3%. AI darling Nvidia NVDA.O plunged 13.5% and was poised for its worst day since March 2020. .N

The global rout kicked off a crucial week that will see the U.S. Federal Reserve and Bank of Canada set monetary policy, along with quarterly results from some of the megacap U.S. companies that drove the bulk of last year's gains in Wall Street.

The Canadian central bank has reduced rates by a cumulative 1.75 percentage points since June 2024 and is anticipated to cut by an additional 25 basis points.

Among individual stocks, power firm TransAlta TA.TO fell the most at 15%.