Nvidia’s stock took a historic hit after investors learned about DeepSeek, a Chinese artificial-intelligence startup with a lower-cost approach, according to a new report from Bloomberg. That news caused market-wide concerns and fueled a major selloff in tech shares.
Key Facts:
- Nvidia shares dropped as much as 13% on Monday, erasing about $465 billion in market value.
- This was the largest single-day market-cap loss in US history, surpassing a $279 billion drop in September.
- DeepSeek, founded by Liang Wenfeng, released an AI model that competes with OpenAI and Meta’s systems.
- US export bans on advanced chips to China have not slowed DeepSeek’s progress, raising questions about its methods.
- Meta and other US firms continue to pour billions into AI projects despite Monday’s selloff.
The Rest of The Story:
Nvidia’s market setback reverberated across Wall Street because of its heavy weight in major stock indexes.
The selloff caused the S&P 500 and Nasdaq 100 to dip early on Monday before partly recovering.
Analysts warn that if low-cost AI tools from startups like DeepSeek gain popularity, large American firms may reconsider the massive investments they have already committed to advanced AI projects.
DeepSeek’s latest open-source model shot to the top of Apple’s App Store, drawing fast attention.
Jefferies analysts wrote, “Concerns have immediately emerged that it could be a disruptor to the current AI business model, which relies on high end chips and extensive computing power and hence energy.”
Meanwhile, giants such as Meta and OpenAI remain undeterred.
Meta announced plans last week to raise its AI spending to as much as $65 billion this year, and OpenAI joined SoftBank and Oracle in a $100 billion venture called Stargate to expand AI infrastructure across the US.
Tensions remain high as the US government tightens chip export controls to China.
Chinese AI startup DeepSeek is freaking out Silicon Valley, causing US and European tech stocks to tumble@TomMackenzieTV explains why https://t.co/jCpNrC1LZz pic.twitter.com/qUpx55eLug
— Bloomberg (@business) January 27, 2025
Yet DeepSeek’s ability to offer a comparable AI experience suggests that Chinese companies may have found creative ways around these constraints.
Commentary:
China’s sudden announcement of this AI breakthrough has stirred the tech world.
One has to wonder if Chinese engineers really did achieve this performance without the NVidea chips that US restrictions aim to withhold.
We tested DeepSeek, and from our standpoint, the OpenAI model still delivers a better result.
OpenAI, however, charges $200 a month for it’s unlimited individual plan, while DeepSeek is currently free for most users, making the cost difference significant.
The Bottom Line:
Nvidia’s stock drop underscores changing sentiments around AI investments.
As competition grows and export bans evolve, global tech players are rushing to adapt.
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