ASML Holding NV, a key supplier of equipment for advanced semiconductor manufacturing, experienced a significant pre-market plunge of 8.36% on Monday, following reports that Chinese AI startup DeepSeek has developed a powerful large language model at a fraction of the cost compared to major US tech firms.

DeepSeek claimed that its latest AI model, DeepSeek-R1, matches the performance of OpenAI's flagship model while costing only 5% as much to develop. This revelation raised concerns among investors over future demand for high-end AI chips and hardware, as low-cost AI models could potentially undermine the need for the most advanced and expensive chips required by leading AI companies.

ASML plays a critical role in the semiconductor supply chain as the sole provider of extreme ultraviolet (EUV) lithography systems, which are essential for manufacturing the most advanced chips with transistors below 10 nanometers. While open-source AI models like DeepSeek-R1 could democratize AI and increase overall demand for advanced chips, concerns about competition from low-cost AI models from China have sparked fears about the potential impact on ASML's specialized equipment and future growth prospects.