In a significant market downturn, Nvidia (NVDA) shares plummeted by nearly 17% on Monday, triggering a widespread sell-off among chip stocks and the broader market. This development stemmed from concerns over a new AI model unveiled by Chinese startup DeepSeek, which has raised questions about the future of AI investments and the emergence of more cost-effective artificial intelligence agents.
The decline in Nvidia’s stock led to a staggering $589 billion loss in the company’s market capitalization, marking the largest single-day loss in recorded stock market history. The tech-heavy Nasdaq Composite index suffered a loss of over 3%, while the S&P 500 index declined by approximately 1.5%.
DeepSeek’s recent AI model launch on January 20 was perceived as a potential threat to OpenAI. The Chinese startup had previously announced that one of its latest AI models required a mere 100 million during the training process.
These revelations have sparked fears that AI models may soon require fewer chips and less energy consumption than they currently do. As a result, Nvidia’s dominance as the world’s largest company, built on the surging demand for its high-end chips used in AI model training and deployment, is now under scrutiny.
Moreover, chip stocks across the board experienced significant declines in premarket trading on Monday, with notable drops observed in Broadcom (AVGO), down over 17%; Micron (MU), off nearly 12%; and Advanced Micro Devices (AMD), down more than 6%.
In a statement to CNBC, Nvidia’s spokesperson applauded the Chinese startup, saying that DeepSeek is an excellent AI advancement and a perfect example of Test Time Scaling.
