Nasdaq Plunges Over AI Fears, Nvidia Wipes Out Record $589 Billion in Market Value
In a major setback for the tech sector, the Nasdaq Composite Index (^IXIC) plummeted over 3% on Monday following concerns about the dominance of U.S. artificial intelligence (AI) companies. The catalyst for this decline was the emergence of DeepSeek, a Chinese AI startup whose recent model release has raised questions about the cost-efficiency and performance of existing AI systems.
Nvidia, a leader in AI hardware production, bore the brunt of the sell-off, with its shares plummeting nearly 17%. This drop contributed to Nasdaq's overall decline of more than $1 trillion in market value. The sell-off extended to other chip-related companies, such as ASML, Broadcom, and Micron Technology, which also suffered significant losses.
DeepSeek's model, which is reportedly capable of matching the performance of leading U.S. AI models while using fewer chips and less data, has sparked concerns about the future of AI investment and the potential displacement of American tech giants. As a result, investors flocked to defensive sectors such as healthcare and consumer staples, which outperformed the tech-heavy Nasdaq.
The market turmoil also weighed on the S&P 500 (^GSPC), which fell nearly 1.5%, and the Dow Jones Industrial Average (^DJI), which gained 0.65%. Big Tech companies such as Apple (AAPL), Meta (META), and Microsoft (MSFT) also faced declines, with MSFT dropping over 2% amid worries about the hefty investments they have made in AI.
The DeepSeek-induced sell-off comes at a time when the tech industry is facing heightened scrutiny over its dominance and the potential implications of AI on the job market. The release of DeepSeek's model has intensified these concerns, raising questions about the sustainability of the AI spending boom that has fueled the growth of U.S. tech companies in recent years.