Nvidia tanks as Chinese AI startup Deepseek spooks global markets
Nvidia is on track for the biggest one day loss of any company in history, as Chinese artificial intelligence (AI) startup Deepseek shakes up global tech markets.
Nvidia, a key driver of the AI stock boom due to its advanced chips, saw its shares plummet over 14 per cent on Germany’s Tradegate on Monday.
The $3.49 trillion (£2.79 trillion) chip maker is trading at $122.39 (£98.10), nearly ten per cent down from Friday’s close. It has lost up to $400bn (£319bn) in market value.
Meanwhile, Nasdaq 100 futures fell 3.2 per cent, with the S&P 500 also dropping 1.9 per cent early Monday.
AJ Bell analyst Russ Mould said: “These market movements suggest investors are worried about disruption to what has so far been an easy ride for most stocks linked to the AI theme.”
European tech stocks followed suit, with ASML falling over eight per cent.
In contrast, Deepseek drove Chinese AI stocks, pushing the Hang Seng Tech Index up two per cent.
The AI titan is on a downward spiral, as investors go into panic mode following the launch of Deepseek’s new AI model this weekend.
Deepseek’s new AI model, seen as a rival to OpenAI and Meta platforms, showcases its reasoning as it answers the users’ prompts.
The model quickly gained traction over the weekend for its cost effectiveness and ability to run on less advanced chips.
A new AI player?
Praised by venture capitalist Marc Andreessen as “one of the most impressive breakthroughs”, the startup topped Apple Store rankings for its transparency.
The AI firm’s innovation has forced traders to reassess the necessity of Nvidia’s high-powered chips, with investors questioning the valuations of AI giants like Nvidia and OpenAI.
Analysts at Bernstein noted that, while its models are remarkable, the wider market reaction may be overblown.
“If Deepseek has reduced costs by ten times, it’s still worth noting that rising model cost trajectories are unsustainable.”
“The need for AI infrastructure remains critical”, they wrote.
Nvidia’s decline comes ahead of a pivotal week for tech earnings, with major leaders such as Apple and Microsoft set to report results in the next few days.
Amid concerns over slowing profit growth, Nvidia’s fourth consecutive day of decline contrasts with wider market gains, as investors question the sustainability of the AI-driven line up .
This also comes amid headwinds for the Chinese-owned video app,TikTok, which was recently faced a temporary ban in the US, as American politicians rally to stop China from accessing Western technology.
Mould added: “That strategy might have backfired as it looks to have encouraged China to ramp up efforts to build its own technology and we’re now seeing evidence that the country is making waves.”