Nvidia leads tech stock plunge as China’s DeepSeek disrupts AI market

Date:

Box 1


Global technology markets reeled on Monday (27 Jan) triggered by the rise of a Chinese artificial intelligence startup, DeepSeek. The company unveiled a sophisticated AI model capable of rivaling Silicon Valley’s best offerings—at a fraction of the cost. Nvidia, a cornerstone of the AI industry, suffered a 17% stock decline, erasing a record $593 billion from its market capitalisation.

Box 2

The Nasdaq Composite, heavily weighted toward technology, fell 3.1%, while the S&P 500 dropped 1.5%. The Dow Jones Industrial Average, less reliant on tech, rose 0.7%. The sharp selloff wiped over US$1 trillion in market value, marking one of Wall Street’s most significant losses in recent years.

DeepSeek’s new model, launched earlier this month, has disrupted the market by offering comparable AI capabilities for as little as 20 to 50 times less cost than rivals like OpenAI. The free DeepSeek R1 assistant, which swiftly overtook ChatGPT in App Store downloads, shocked investors and industry leaders alike.

Nvidia and chipmakers take the brunt

Box 3

Nvidia’s 17% plunge not only marked its worst single-day loss but also reflected fears about the future of high-margin AI chips. Other chipmakers also suffered: Broadcom fell 17.4%, Super Micro Computer dropped 13%, and the Philadelphia Semiconductor Index saw its biggest decline since 2020, tumbling 9.2%.
Oracle shares declined 14%, while energy companies reliant on the AI boom also faltered. Constellation Energy fell 21%, and Vistra lost 28.3%. According to Dow Jones Market Data, power utilities faced steep selloffs amid shrinking expectations of energy demand from data centres.

‘Sputnik moment’ for artificial intelligence

Marc Andreessen, a prominent Silicon Valley investor, likened DeepSeek’s model to the “Sputnik moment” that launched the space race.

DeepSeek’s development highlights a pivotal shift in the global AI landscape, which has been dominated by US firms like Nvidia and Microsoft. The Hangzhou-based firm achieved its breakthrough using Nvidia’s low-capability H800 chips, spending less than US$6 million on development.

Box 4

Despite the enthusiasm surrounding the startup, Brian Jacobsen, chief economist at Annex Wealth Management, warned of widespread implications. “DeepSeek threatens to upend the AI market narrative,” he said. “The model’s efficiency could reduce demand for data centres, high-powered chips, and the infrastructure supporting AI.”

Broader implications and investor reactions

The tech selloff comes amidst recent optimism in the US AI sector. Last week, President Donald Trump announced a US$500 billion private-sector investment in AI infrastructure under the Stargate initiative, backed by major players like OpenAI and Oracle.

Daniel Morgan, a senior portfolio manager at Synovus Trust Company, called Monday’s losses an “overreaction.” He argued that DeepSeek’s model mainly competes with mobile applications like ChatGPT and Alphabet’s Gemini, while demand for chips powering data centres remains robust.

Nevertheless, Nvidia’s shares closed at US$118.42, a significant decline from their 2024 peak. Despite its 239% rise in 2023, the stock is now down 11.8% for 2025.

Bond markets and havens gain traction

As technology stocks plummeted, investors turned to safe-haven assets. US government bond prices surged, pushing the 10-year Treasury yield down to 4.53%. Meanwhile, the Japanese yen and Swiss franc strengthened against the US dollar. Bitcoin, which had briefly dropped below US$100,000, recovered to trade at US$101,405.



Source link

Box 5

Share post:

spot_img

Popular

More like this
Related

estiatorio Milos – SilverKris

estiatorio Milos, a Greek restaurant by world-renowned chef...

Singapore’s non-oil domestic exports fall 2.1% in January, reversing December’s 9% growth

SINGAPORE: Singapore’s non-oil domestic exports (NODX) fell by...

Starmer Offers to Send U.K. Troops to Ukraine as Part of Peace Deal

Prime Minister Keir Starmer on Sunday offered British...