DeepSeek sparks AI stock selloff; Nvidia loses record

 

DeepSeek Triggers AI Stock Selloff; Nvidia Suffers Record $593 Billion Market Cap Loss

Nvidia experienced its largest-ever single-day market capitalization drop on Monday, losing $593 billion—more than double its previous record from last September. This steep decline came as global investors fled tech stocks, spooked by the rise of DeepSeek, a Chinese AI startup offering a low-cost alternative to AI services, potentially threatening the dominance of companies like Nvidia.

DeepSeek's new AI assistant, launched last week, quickly surpassed ChatGPT in downloads on the Apple App Store by Monday. The news sent the tech-heavy Nasdaq index plunging by 3.1%, with Nvidia seeing a nearly 17% drop in share value, marking its biggest one-day loss on Wall Street.

The selloff, which started in Asia with Japan’s SoftBank Group down by 8.3%, spread to Europe, where ASML saw a 7% decline. The ripple effect extended to other tech giants, including Broadcom, Microsoft, and Alphabet, all suffering significant losses.

Experts are concerned that if DeepSeek's more affordable AI model proves successful, it could disrupt the AI industry, reducing the need for costly chips and large data centers, which have driven the recent AI market boom. This shift could potentially deflate inflated valuations of AI stocks.

Following this news, US Treasury bonds gained favor among investors seeking safety, while currencies like the yen and Swiss franc strengthened against the US dollar.

While some analysts, such as Daniel Morgan of Synovus Trust, view the market's response as an overreaction, believing that DeepSeek's model is more suited for mobile devices rather than large-scale data centers, others see it as a pivotal moment in the AI space, similar to the launch of the Sputnik satellite in the 1950s.

Despite the selloff, Nvidia's stock still posted a slight after-hours recovery, though it remains down 11.8% year-to-date.

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