GLOBAL MARKETS-China's AI drive hammers tech stocks

Changes dateline, writes through to update prices for Asia morning

By Lawrence Delevingne, Samuel Indyk and Tom Westbrook

BOSTON/LONDON/SINGAPORE, Jan 28 (Reuters) - U.S. stock futures steadied, the dollar ticked higher and tech stocks in Asia slid on Tuesday following a wave of selling as apparent advances by a Chinese AI startup cast doubt on U.S. dominance and spending in one of the market's hottest sectors.

Overnight, chipmaker Nvidia NVDA.O dived 17%, wiping off nearly $593 billion in the biggest market capitalisation loss in history.

"We are on the front edge of an urgent re-evaluation of a narrative that has gripped the market for almost two years. That makes it hard to shrug off after 36 hours," said Brent Donnelly, president of trading and analytics firm Spectra Markets.

Nvidia stock was up slightly in after-hours trading. Nasdaq 100 futures NQc1 rose 0.1% and S&P 500 futures ESc1 were broadly flat.

Nvidia supplier Advantest 6857.T was down 10% in Japan on Tuesday, taking losses for the week so far to nearly 19%. There were further sharp falls for AI-backer SoftBank Group 9984.T, down 5.5%, and data-centre cable maker Furukawa Electric 5801.T, down 8%. Both had already fallen heavily on Monday, with SoftBank now 13% lower after two days and Furukawa down 20%.

Data centre landlords tumbled in Australia. Tech heavy markets in Taiwan and South Korea were closed for a holiday.

Nvidia accounted for most of the 3% drop in the Nasdaq on Monday though selling extended from Tokyo to New York and hit everything with a slice of the AI supply chain, from cable makers to data centres, power utilities and software firms.

The CBOE Volatility Index .VIX, known as Wall Street's fear gauge, leapt and safe-haven assets such as government bonds, the yen and the Swiss franc all rallied.

Ten-year U.S. Treasury yields US10YT=RR fell 9.5 basis points, and were last steady at 4.55% in Asia. Fed fund futures have put in an extra 9 bps of easing by year end. Even oil prices dropped 2% on worries about energy demand. O/R

DeepSeek, a little-known startup from Hangzhou, China, has a free AI assistant it said was developed very cheaply using lower-cost chips and less data than U.S. rivals.

"The narrative that's concerning people here is that DS ... has delivered performance-topping models on a shoestring budget," said J.P. Morgan sector specialist Josh Meyers in a note to clients.

"This has been seen by some as egg-on-the-face of the big, multi-billion dollar operations like OpenAI, Google and Anthropic. And it's calling into question whether we're going to need multi billions of dollars in compute capex when DeepSeek's leading distilled models can run natively on an iPhone."

BROAD RISK-OFF MOOD

On Wall Street, the S&P 500 .SPX dropped 1.5%. Chipmaker Broadcom AVGO.O fell 17.4% and the Philadelphia semiconductor index .SOX dropped 9.2% - its biggest loss since March 2020.

Gold XAU= prices declined more than 1% as investors liquidated bullion to cover losses elsewhere.

Google parent Alphabet GOOGL.O fell 4.2% and Microsoft MSFT.O fell 2.1%, with both steadying in after-hours trade.

In Europe, the STOXX Europe 600 technology index .SX8P fell more than 3% and ASML ASML.AS, which makes chip manufacturing equipment, fell 7%.

Bitcoin BTC=, lately a barometer of markets' risk appetite, dropped below $100,000 for the first time in a week before steadying around $101,700.

The dollar fell nearly 1% against the yen JPY=EBS overnight and 0.4% against the Swiss franc > - two currencies that often gain during periods of market unease.

Early on Tuesday it ticked higher against both, trading at 155.36 yen and making modest gains elsewhere, holding the euro EUR=EBS to $1.0454. Markets in China were closed to usher in the Lunar New Year and Hong Kong trade closes at noon.

Both the U.S. Federal Reserve and the European Central Bank meet to set interest rates later in the week.