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Nvidia’s stock slumps amid DeepSeek's rise

Dark times have come for Nvidia! The company is being pushed out of the artificial intelligence (AI) market! The threat comes from the R1 model by Chinese startup DeepSeek, which has outperformed OpenAI’s latest O1 version.

Against this backdrop, shares of Nvidia, the global leader in computing hardware, plummeted. On Monday, January 27, they crashed by more than 13% on the NASDAQ, falling to $123.

The drop turned out to be even worse than in premarket trading. The reason is the unique features of DeepSeek’s model, which its developers claim is a competitive product at a much lower cost.

This development has raised doubts about the need for Nvidia’s expensive hardware. As a result, the world’s most valuable company might lose its title.

The AI-linked stock crash dragged down the entire US market. On Monday, January 27, the S&P 500, which had been trading above 6,100 points, sank below 6,000.

According to Wei-Sern Ling, Managing Director at Union Bancaire Privée, DeepSeek’s breakthrough shows that powerful AI models can be built for far less money. However, this realization has made the tech sector much less attractive to investors.

Adding fuel to the fire, the US stock market lost over $1 trillion in a single day due to DeepSeek’s success. Nvidia alone lost about $600 billion in market capitalization. It was the company’s darkest day! In fact, this was the largest single-day stock drop in US history.

Earlier this week, Nvidia shares fell another 17%, hitting $118.58 per share. This marked the company’s worst trading day since March 16, 2020. The decline was more than double the market cap of Coca-Cola and Chevron combined and even surpassed the total value of Oracle and Netflix!

The Nvidia sell-off came amid growing competition from DeepSeek. Some experts believe the Chinese firm could win the global AI race. It is worth noting that back in December, DeepSeek launched a free open-source AI model, built in just two months with under $6 million. Curiously, the model was trained using Nvidia’s H800 chips.

Analysts at Cantor warn that DeepSeek’s breakthrough has sparked serious concerns about demand for computing models. The market is also worried about peak spending on GPUs.

Companies that rely on Nvidia’s graphics processors for their data center equipment also suffered heavy losses. Shares of Dell, Hewlett Packard Enterprise, Super Micro Computer, and Oracle all took a significant hit.

As of now, DeepSeek’s AI has skyrocketed to first place among App Store free apps and has become one of the most downloaded apps on Google Play.

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