Nvidia Corp., the world’s largest semiconductor company, suffered its biggest single-day stock drop in history on Monday, erasing $589 billion in market value. The 17% decline, its sharpest since March 2020, was driven by investor concerns over Chinese AI startup DeepSeek, which appears to be disrupting the high-cost AI development model central to Nvidia’s success.
The selloff sent shockwaves through markets, with the S&P 500 Index falling 1.5% and the Nasdaq 100 tumbling nearly 3%. Nvidia’s weight in major indices amplified the impact, marking its selloff as one of the top market value losses in S&P 500 history.
DeepSeek’s recent emergence has rattled the tech sector. The startup’s low-cost AI model, competitive with those of OpenAI and Meta Platforms Inc., has captured attention globally. Launched by Chinese quant-fund chief Liang Wenfeng, DeepSeek’s model has surged to the top of Apple’s App Store rankings. Its innovation is seen as a potential challenge to Nvidia’s dominance, raising concerns about the viability of the US firm’s high-spending AI development framework.
Analysts highlighted the disruptive potential of DeepSeek’s approach, which achieves comparable AI capabilities at a fraction of the cost. This could challenge Nvidia’s growth trajectory, which has relied heavily on its semiconductors powering AI systems that demand substantial resources, including advanced chips and computing power.
Adding to investor unease, Meta recently announced plans to increase capital expenditures on AI projects to as much as $65 billion, while OpenAI, SoftBank, and Oracle unveiled a $100 billion joint venture to expand AI infrastructure. These moves underscore the intense competition and spending pressures within the AI sector.
Meanwhile, DeepSeek’s rise has also raised questions about the effectiveness of US export controls aimed at curbing China’s access to advanced semiconductor technologies. Despite restrictions on Nvidia’s AI chips, DeepSeek’s progress highlights China’s ability to innovate with limited resources. Nvidia acknowledged DeepSeek’s model as a significant advancement, asserting that the Chinese company complied with US regulations.
As Nvidia navigates this disruption, market focus will likely shift to how effectively it adapts to an evolving AI landscape increasingly marked by cost-efficient innovations.
