Nvidia Loses $600 Billion in Market Value Amid DeepSeek AI Breakthrough

Featured & Cover Nvidia Loses $600 Billion in Market Value Amid DeepSeek AI Breakthrough

Nvidia’s market value took a historic hit of nearly $600 billion on Monday as tech stocks tumbled, driven by concerns that Chinese AI firm DeepSeek may have overtaken the United States in artificial intelligence innovation. The Nasdaq Composite, which represents the nation’s leading tech companies, dropped over 3%, while the Dow Jones Industrial Average recovered from earlier losses to close nearly 300 points higher. The S&P 500 also fell, losing nearly 1.5%.

The market downturn was triggered by impressive advancements claimed by DeepSeek, a Chinese AI company whose achievements were highlighted over the weekend. DeepSeek initially unveiled its open-source AI model in December, asserting that it required only two months and under $6 million to develop. These figures pale in comparison to the hundreds of billions invested by U.S. tech giants like OpenAI, Microsoft, and Meta in creating their own AI systems. This raised concerns that China might be outpacing the U.S. in both the scale and efficiency of AI investment.

DeepSeek’s influence is growing rapidly, as evidenced by its app becoming the top free download in Apple’s App Store, pushing OpenAI’s ChatGPT into second place.

Nvidia, a major player in the semiconductor industry, experienced one of the most significant losses in the stock market plunge. Its shares plummeted by as much as 18%, marking the largest single-day market value loss in U.S. history, according to Bloomberg. Despite its recent success—shares had surged over 200% in the last two years—this setback has left a considerable dent in its valuation.

In response to the situation, Nvidia issued a statement acknowledging DeepSeek’s advancements: “DeepSeek is an excellent AI advancement and a testament to what can be achieved by leveraging widely available models and compute that is fully export control compliant.”

Other semiconductor companies also faced steep declines. Micron Technology and Arm Holdings each dropped 10%, while ASML fell 6%. Among mega-cap tech firms, Microsoft declined 2%, and Google’s parent company, Alphabet, fell 4%. Meta Platforms, which is developing its own open-source AI model, initially fell but managed to close 1.9% higher.

The emergence of DeepSeek comes despite U.S. export controls on advanced semiconductors to China, designed to limit the country’s technological capabilities. Microsoft CEO Satya Nadella, speaking at the World Economic Forum last week, called DeepSeek’s progress “super impressive … and super-compute efficient.” He added, “We should take the developments out of China very, very seriously.”

Concerns about the implications of DeepSeek’s AI model extend to national security. Representative John Moolenaar, R-Mich., chairman of the Select Committee on China, expressed apprehension: “The U.S. cannot allow CCP models such as DeepSeek to risk our national security and leverage our technology to advance their AI ambitions. We must work to swiftly place stronger export controls on technologies critical to DeepSeek’s AI infrastructure.”

Meanwhile, Microsoft announced plans for $35 billion in investments by the end of 2024 to develop “trusted and secure AI and cloud datacenter infrastructure.”

The ripple effects of the tech sell-off extended to energy companies tied to AI infrastructure. Constellation Energy, which recently partnered with Microsoft to restart the Three Mile Island nuclear plant to power AI servers, saw its shares sink by 20%. Other energy firms perceived as AI beneficiaries, such as Vistra Energy and NRG Energy, also suffered substantial losses. Siemens Energy, a supplier of utility equipment, plunged 20%, while GE Vernova dropped over 21%.

Despite DeepSeek’s claims, skepticism remains. Bernstein analyst Stacy Rasgon questioned the validity of DeepSeek’s cost-efficiency claims: “We believe that … DeepSeek did not ‘build OpenAI for $5M.’ The models look fantastic, but we don’t think they are miracles.”

However, some experts view DeepSeek’s developments as a potential turning point for AI. Giuseppe Sette, president of AI market research firm Reflexivity, noted that DeepSeek’s methods could reshape the industry. “DeepSeek has taken the market by storm by doing more with less. In layman terms, they activate only the most relevant portions of their model for each query, and that saves money and computation power. This shows that with AI, the surprises will keep on coming in the next few years,” Sette stated in a note.

As global competition in artificial intelligence intensifies, DeepSeek’s advancements signal a significant shift, raising questions about the future dominance of U.S. tech firms in the rapidly evolving AI landscape.

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