Market Mayhem: Nvidia’s Record-Breaking Plunge
A New Player in Town: DeepSeek’s AI Breakthrough
The tech world was sent into a tailspin on Monday as Nvidia Corp.’s stock plummeted 17%, wiping out a staggering $589 billion from the company’s market capitalization. This unprecedented drop eclipsed the previous record, set in September, and marked the largest single-day loss in US stock market history.
Ripple Effect: Broader Market Impact
The fallout didn’t stop there. The S&P 500 Index fell 1.5%, while the Nasdaq 100 tumbled nearly 3%. The semiconductor giant’s significant weight in major indexes meant that its selloff had a profound impact on the broader market.
The AI Arms Race: DeepSeek’s Disruptive Potential
At the heart of the turmoil lies Chinese artificial-intelligence startup DeepSeek, whose low-cost approach has reignited concerns that big US companies have invested too heavily in AI development. DeepSeek’s latest model, released last week, is seen as competitive with those of OpenAI and Meta Platforms Inc., and its open-sourced product has already shot to the top of Apple Inc.’s App Store rankings.
A Shift in the AI Landscape
The implications of DeepSeek’s breakthrough are far-reaching. As Jefferies analysts noted, “Concerns have immediately emerged that it could be a disruptor to the current AI business model, which relies on high-end chips and extensive computing power and hence energy.” Nvidia, which has been the biggest beneficiary of the AI spending boom, may find its dominance challenged.
Investor Jitters: ROI Concerns
While spending on AI is expected to continue, investors may become increasingly wary of rewarding companies that fail to demonstrate a sufficient return on investment. This could lead to a shift in the way companies approach AI development, with a greater emphasis on efficiency and cost-effectiveness.
The US-China AI Rivalry
The US has taken steps to limit China’s progress in AI, banning the export of advanced semiconductor technologies and restricting sales of advanced Nvidia AI chips. However, DeepSeek’s progress suggests that Chinese AI engineers have found ways to work around these restrictions, focusing on greater efficiency with limited resources.
Nvidia’s Response: A Vote of Confidence
In a statement, Nvidia praised DeepSeek’s model as an “excellent AI advancement” and indicated that the Chinese company did not violate US restrictions in creating its technology. The company also emphasized the importance of inference, or the work of running AI models, which requires significant numbers of Nvidia GPUs and high-performance networking.
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