Nvidia Plunge Erases Record Stock Market Value Amid Concerns Over Chinese AI Rival DeepSeek
Nvidia Corp.'s stock plummeted 17% on Monday, wiping out a staggering $589 billion in market capitalization. This eclipsed the previous record drop in September, when a 9% decline erased $279 billion in value.
The downturn was driven by concerns about Chinese AI startup DeepSeek, which has emerged as a competitive rival offering AI performance at a lower cost. DeepSeek's recent AI model has garnered attention for its capabilities comparable to those of OpenAI and Meta Platforms Inc.
Nvidia, a major semiconductor supplier for AI technology, has been the primary beneficiary of the growing investment in AI. However, DeepSeek's advancements have raised concerns about the return on investment for companies heavily investing in AI.
To address China's AI ambitions, the US has restricted the export of advanced semiconductor technologies and sales of Nvidia AI chips. However, DeepSeek's progress suggests that Chinese AI engineers have found ways to circumvent these bans.
Nvidia has acknowledged DeepSeek's AI model as an "excellent advancement" while emphasizing that its creation did not violate US restrictions on access to advanced chips. Nonetheless, Nvidia notes that running AI models requires substantial Nvidia GPUs and high-performance networking.
The Nvidia selloff has had ripple effects throughout the broader market, highlighting the company's weight in major indexes. Including Monday's fall, Nvidia selloffs have contributed to eight of the top ten largest one-day drops in the S&P 500 Index, based on market value. The S&P 500 and the Nasdaq 100 declined by 1.5% and 3%, respectively.
The semiconductor sector and broader technology stocks experienced a wider sell-off as DeepSeek's low-cost approach sparked concerns about excessive spending on AI development by US companies.