Updates to afternoon

By Caroline Valetkevitch

NEW YORK, Jan 27 (Reuters) - The S&P 500 and the Nasdaq fell sharply on Monday, led by Nvidia and other chipmakers as popularity of a low-cost Chinese artificial intelligence model raised investor worries about the outlooks for current AI leaders in the United States.

Nvidia's shares NVDA.O were down 17%, while an index of semiconductor stocks .SOX slid 10% and was on track for its biggest single-day percentage fall since March 2020.

Nvidia was on track to lose roughly $600 billion in stock market value, the deepest ever one-day loss for a company on Wall Street, according to LSEG data. It was more than double the previous one-day record loss, set by Nvidia last September.

Chinese startup DeepSeek has rolled out a free assistant it says uses cheaper chips and less data, raising questions about investor expectations that AI will drive demand along a supply chain from chipmakers to data centers.

DeepSeek's AI Assistant on Monday overtook rival ChatGPT to become the top-rated free application available on Apple's App Store in the United States.

Kim Forrest, chief investment officer at Bokeh Capital Partners in Pittsburgh, said there are still many questions about the DeepSeek model and its impact.

"Today is a drubbing for these stocks, but I don't necessarily think whatever's going to happen in the short while here - the next couple of days - is where they are ultimately valued," she said

The Dow Jones Industrial Average .DJI rose 207.26 points, or 0.47%, to 44,634.55, the S&P 500 .SPX lost 114.54 points, or 1.86%, to 5,987.77 and the Nasdaq Composite .IXIC lost 732.61 points, or 3.67%, to 19,222.53.

Among other big tech-related companies, Microsoft MSFT.O was down 2.5% and Google-parent Alphabet GOOGL.O was down 4%, while AI server maker Dell Technologies DELL.N was down 11.7%.

Data center operators also tanked, with Digital Realty DLR.N sliding 10.6%.

The Cboe Volatility Index .VIX, known as Wall Street's "fear gauge", hit its highest since Dec. 20 and was last up at 18.29.

Earnings from some big technology companies are due this week, including from Microsoft.

Financial markets also were digesting news that the U.S. and Colombia pulled back from the brink of a trade war on Sunday after the White House said the South American nation had agreed to accept military aircraft carrying deported migrants.

Investors also are keen to hear from the Federal Reserve, which is widely expected to hold its lending rate steady in its first interest-rate decision of the year due on Wednesday.

Declining issues outnumbered advancers by a 1.01-to-1 ratio on the NYSE.

On the Nasdaq, 1,676 stocks rose and 2,727 fell as declining issues outnumbered advancers by a 1.63-to-1 ratio.

(Additional reporting by Shashwat Chauhan and Sukriti Gupta in Bengaluru; Editing by Shounak Dasgupta, Devika Syamnath and Aurora Ellis)

((caroline.valetkevitch@thomsonreuters.com))