GLOBAL MARKETS-US futures steady after DeepSeek selloff, dollar higher

By Tom Westbrook

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

Chipmaker Nvidia NVDA.O dived 17% on Monday, wiping off nearly $593 billion in the biggest market capitalisation loss in history. Its stock was up slightly in after-hours trading and Nasdaq 100 futures NQc1 rose 0.1%, but the mood was nervous.

The Philadelphia semiconductor index .SOX, down 9.2%, notched its biggest loss since March 2020.

"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.

S&P 500 futures ESc1 were down 0.1% on Tuesday while European futures STXEc1 were broadly steady. FTSE futures FFIc1 rose 0.2%.

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.

Selling pressure extended in Japan where Nvidia supplier Advantest 6857.T slid 11%. It is down 19% in two days. .T

AI-backer SoftBank Group 9984.T, fell 5% for a fall of 13% over two days, and data-centre cable maker Furukawa Electric 5801.T dropped more than 8% for a two-session loss of 20%.

The Nikkei .N225 fell 1.3%. The rest of Asia was quiet with China, Taiwan and South Korea closed for the Lunar New Year and Hong Kong trading hours shortened ahead of the break.

U.S. Treasuries, which rallied on Monday, were steady with the 10-year yield at 4.55%.

ASML ASML.AS, which makes chip manufacturing equipment, lost 7% on Monday and may face more pressure on Tuesday.

SHOESTRING SURPRISE

DeepSeek, a little-known startup from Hangzhou, China, has upended markets with a free AI assistant it said was developed 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."

Ripples from the stock market selling fanned across the world. In Australia, data-centre landlords tumbled and a slump in the uranium price UXXc1 dragged miners.

Oil prices nursed Monday losses, with benchmark Brent crude futures LCOc1 steadying around $77.44 a barrel and gold XAU=, which had slipped as investors liquidated bullion to cover losses, hovered around $2,742 an ounce.

The safe-haven yen JPY=EBS and Swiss franc CHF=EBS gave back some of Monday's gain, leaving the dollar at 155.61 yen and up broadly on other majors.

Foreign exchange markets have an eye on central bank meetings in the U.S. and Europe this week but the big market mover may be earnings at Microsoft MSFT.O, Tesla TSLA.O and Meta META.O on Wednesday. Executives can expect to be asked whether they still plan to spend so much on computing power.

"The DeepSeek news will now cause pressure on the AI hardware supply chain on concerns that the likes of Meta will do a U-turn and slash capex spending," said Christopher Wood, global head of equity strategy at Jefferies.