Investors dumped technology stocks worldwide on Monday, erasing $592.7 billion from Nvidia’s market value as fears grew that a low-cost Chinese AI model could disrupt the dominance of major AI players.
Chinese startup DeepSeek launched a free AI assistant last week, claiming it uses less data and operates at a fraction of the cost of competitors like ChatGPT. By Monday, the assistant had surpassed ChatGPT in downloads on Apple’s app store, sparking concerns about the future of incumbent AI companies.
The Nasdaq fell 3.1%, with Nvidia leading the decline. Nvidia shares plunged nearly 17%, marking a record one-day market-cap loss for a Wall Street stock, according to LSEG data. Other major players, including Broadcom (-17.4%), Microsoft (-2.1%), and Alphabet (-4.2%), also suffered significant losses.
The selloff extended globally. Japan’s SoftBank Group dropped 8.3%, while Europe’s semiconductor giant ASML fell 7%. The Philadelphia Semiconductor Index saw its biggest drop since March 2020, down 9.2%.
DeepSeek: AI’s “Sputnik Moment”
DeepSeek’s disruptive potential lies in its cost efficiency and performance. The startup’s flagship models, DeepSeek-V3 and DeepSeek-R1, reportedly outperform competitors while being up to 50 times cheaper. The models were developed using Nvidia’s H800 chips, costing less than $6 million to train.
Marc Andreessen, a prominent venture capitalist, called DeepSeek’s launch a “Sputnik moment” for AI, likening it to the start of the space race in the 1950s. However, analysts remain divided on its long-term impact.
Brian Jacobsen, chief economist at Annex Wealth Management, highlighted how DeepSeek could reshape the AI landscape, potentially reducing demand for high-end chips and data centers. On the other hand, Deutsche Bank analyst Adrian Cox argued that cheaper AI would fuel mass adoption and create new opportunities for the tech industry.
Fallout in AI and Related Industries
The ripple effects extended to other tech and power-related industries. Vertiv Holdings, which develops data center infrastructure, plummeted 29.9%. Power utilities like Vistra (-28.3%), Constellation Energy (-20.8%), and NRG Energy (-13.2%) also tumbled on reduced expectations for AI-driven energy demand.
Despite Monday’s losses, some investors saw an opportunity. Daniel Morgan of Synovus Trust Company suggested the selloff was an overreaction, noting that DeepSeek’s models are geared toward mobile and PC users, rather than data centers—a key revenue stream for Nvidia and others.
Nvidia closed at $118.42, down 11.8% for the year, after soaring 171% in 2024 and 239% in 2023. Still, concerns persist over whether this AI-driven rally has reached its peak.
With DeepSeek challenging the status quo, global tech markets face growing uncertainty over the future of AI and its broader implications.
