Nvidia Loses $593 Billion In A Single Day: Chinese AI DeepSeek Shakes Tech Market - Details

Global financial markets were rattled on Monday as the emergence of DeepSeek, a Chinese startup offering a cost-effective AI assistant, sent shockwaves through the tech sector.

Investors dumped shares amid fears that DeepSeek's innovations could undermine established leaders like Nvidia, sparking the largest single-day market cap loss in Wall Street history.

Nasdaq Plummets Amid Investor Panic
The tech-heavy Nasdaq Composite index (IXIC) plunged 3.1% on Monday, driven by a massive sell-off in semiconductor stocks. Nvidia, the leading chipmaker, bore the brunt with its shares plummeting nearly 17%, resulting in a staggering $593 billion loss in market value. This unprecedented decline eclipsed Nvidia's own previous record set just months ago.

According to LSEG data, Nvidia's market-cap collapse overshadowed broader losses across the tech sector, with chipmakers like Broadcom Inc and tech giants including Microsoft and Alphabet also suffering significant declines.

Impact of DeepSeek's Disruptive AI Model
The catalyst for this market turmoil was DeepSeek, which launched a revolutionary AI assistant claiming superior efficiency at a fraction of the cost compared to its competitors. By Monday, DeepSeek's app had surpassed US rival ChatGPT in downloads from Apple 's app store, intensifying concerns about the future of AI technology and its economic implications.

Brian Jacobsen, chief economist at Annex Wealth Management, expressed apprehension: "If it’s true that DeepSeek is the proverbial 'better mousetrap,' that could disrupt the entire AI narrative that has driven markets over the last two years."
Market Reaction and Expert Insights
The abrupt sell-off reflects broader anxieties among investors who had poured substantial capital into AI-related equities, buoyed by expectations of exponential growth. Just days before, US AI stocks had soared following President Donald Trump's announcement of a $500 billion private-sector investment plan in AI infrastructure through the Stargate initiative.

However, the euphoria was short-lived as DeepSeek's debut cast doubt on the sustainability of current market valuations. Marc Andreessen, a prominent venture capitalist, likened DeepSeek's breakthrough to AI's "Sputnik moment," a reference to the Soviet Union's pivotal space race achievement in the 1950s.

DeepSeek's Technological Advancements
Little known outside tech circles, DeepSeek leverages Nvidia's H800 chips for its AI models, significantly reducing operational costs. Its latest models, DeepSeek-V3 and DeepSeek-R1, have garnered praise for their affordability and efficiency, posing a direct challenge to established players like OpenAI and Google 's Gemini.

Daniel Morgan of Synovus Trust Company cautioned against overreacting to DeepSeek's impact, highlighting that its model primarily targets mobile and PC applications rather than data centers. He emphasized the enduring demand for high-performance chips essential for AI data processing, benefiting companies like Nvidia, AMD, and Broadcom.

Financial and Market Implications
Despite Monday's turmoil, some analysts view the market correction as an opportunity to acquire tech stocks at reduced prices. Nvidia, for instance, closed at $118.42, marking an 11.8% year-to-date decline but saw a modest after-hours rebound. This volatility prompted banks to reassess risk management strategies amid client divestments from high-risk tech assets.

Sector-wide Fallout and Future Trends
Beyond tech stocks, the ripple effects extended to industries like data center infrastructure and power utilities. Companies like Vertiv Holdings and power utility providers such as Vistra and Constellation Energy saw steep declines, reflecting investor concerns over reduced demand projections from AI-driven data centers.

In conclusion, while DeepSeek's disruptive entry into the AI landscape has sparked immediate market turbulence, the long-term implications remain uncertain. As investors recalibrate their strategies amidst evolving technological dynamics, the resilience of established tech leaders and the adaptability of the broader market will determine the sector's trajectory in the coming months.

(With Inputs From Reuters)