* China's DeepSeek AI assistant surges in popularity * Investors ponder AI race between China, U.S. * Nvidia shares sink 17%, wiping $593 bln off market value * Japanese technology shares slide for second day (Updates with tech shares in Europe, Nvidia shares in Frankfurt) By Ankur Banerjee and Rae Wee LONDON/SINGAPORE, Jan 28 (Reuters) - Global technology shares recovered some poise on Tuesday, but remained vulnerable after a rout sparked by the emergence of a low-cost Chinese artificial intelligence model made investors question the sky-high valuation and dominance of AI bellwethers. Shares of chipmaker Nvidia NVDA.O , the poster child of the AI boom in recent years, fell 17% on Monday, wiping $593 billion from its market value - a record one-day loss for any company - and dragging U.S. stocks lower. By Tuesday, Nvidia shares were up nearly 6% in Frankfurt, while those in Oracle ORCL.N rose 3.4% and AI data analytics company Palantir PLTR.O rose 2.97%. It all stemmed from a free AI assistant launched by Chinese startup DeepSeek last week that the firm said uses less data at a fraction of the cost of services available currently. That garnered attention worldwide, although scepticism lingers. OpenAI CEO Sam Altman called it an "impressive model". "We will obviously deliver much better models and also it's legit invigorating to have a new competitor!," Altman, the head of the AI firm behind ChatGPT, said in a social media post. The launch and increasing popularity of DeepSeek spurred investors to dump tech stocks globally, with ripples felt from Tokyo to Amsterdam to Silicon Valley. Markets in tech-heavy South Korea and Taiwan are closed for the next few days for Lunar New Year. Mainland China is closed until Feb. 4, leaving the spotlight firmly on Japanese firms. On Tuesday, chip-testing equipment maker Advantest 6857.T , a supplier to Nvidia lost 10% after diving nearly 9% on Monday. Chip-making equipment maker Tokyo Electron 8035.T and technology start-up investor SoftBank Group 9984.T slid 5%. "It's clearly a sell first, ask questions later approach, and we've actually seen that kind of move in the past in Japan," said Kei Okamura, a portfolio manager at Neuberger Berman, referring to a global market meltdown in August headlined by Japan's Nikkei. In Europe on Tuesday, shares in Dutch semiconductor company ASML ASML.AS , which closed down 7.1% on Monday, opened up 0.9%, while shares in BE Semiconductor BESI.AS rose 1.2%. Over in the U.S., Broadcom AVGO.O finished down 17.4%, while ChatGPT backer Microsoft MSFT.O fell 2.1% and Google parent Alphabet GOOGL.O closed down 4.2%. The Philadelphia semiconductor index .SOX tumbled 9.2%, for its deepest percentage drop since March 2020. NO MARGIN OF ERROR The selloff has brought into the spotlight the crowded positioning among investors and the billions of dollars U.S. tech giants are pouring in to develop AI capabilities, as well as the extremely high valuation of some of these firms. "What makes Monday's tech selloff so jarring is that the valuations of many of these AI and tech companies offer no margin of error," said David Bahnsen, chief investment officer at The Bahnsen Group. "The excessive weighting these tech stocks have in many investor portfolios and the high concentration these tech stocks have in the market indices was a significant and under-appreciated risk issue." The hype around AI has powered a huge flow of capital into equities, inflating valuations and lifting stock markets to record highs, leading to an increase of around $10 trillion in the market value of "Magnificent Seven" companies since ChatGPT kicked off the AI boom in November 2022. It is not just the chipmakers and tech companies but companies focused on data centres also taking a hit, with Malaysia's utility conglomerate YTL Power YTLP.KL down 9% on Tuesday, its third session of steep loss. "We're still, like many investors, gathering information," said Neuberger Berman's Okamura, noting that a lot of investors are scrambling to gather more information and decide their next move. "I think we’re going to see many more of these (developments) going forward. And we’ve seen technological advancements like this that have had implications for cost spend." Investor focus will be on the flurry of tech earnings this week, with executives likely keen to calm frayed nerves and ease concerns about capital spending. AI RACE Little is known about the Hangzhou startup behind DeepSeek, whose controlling shareholder is Liang Wenfeng, co-founder of quantitative hedge fund High-Flyer, records showed. Its researchers wrote in a paper last month that its DeepSeek-V3 model, launched on Jan. 10, used Nvidia's lower-capability H800 chips for training, at a cost of less than $6 million. The launch and the popularity of the app contrasts with the lacklustre reception that met the Chinese ChatGPT equivalent made by search engine giant Baidu 9888.HK , which exposed the gap in AI capabilities between U.S. and Chinese firms. The quality and cost efficiency of DeepSeek's models have flipped this narrative on its head and prompted a warning from U.S. President Donald Trump, who called it "a wakeup call for our industries." Japan's digital minister Masaaki Taira said DeepSeek's emergence had upended conventional wisdom that Chinese AI was years behind. "It's been said that Chinese generative AI might be about five years behind, but that turned out to be wrong and it seems to be on a fairly good track," Taira said, adding that Japan was taking a closer look into suggestions that Chinese AI may be more cost effective. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ The Magnificent Seven versus the market https://reut.rs/3PPXCvf The Magnificent Seven’s slice of the S&P 500 https://reut.rs/4hd0m1x ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Reporting by Ankur Banerjee and Rae Wee in Singapore; Additional reporting by Kantaro Komiya in Tokyo and Amanda Cooper in London; Editing by Christopher Cushing and Louise Heavens) ((ankur.banerjee@thomsonreuters.com;; Mobile - +65 8121 3925; Follow on X (formerly Twitter): @AnkurBanerjee17;))