Advertisment

Nvidia suffers market loss as DeepSeek gains momentum

Nvidia sheds nearly $600 billion in market value as China’s DeepSeek challenges U.S. dominance in generative AI.

author-image
Social Samosa
New Update
dsa

Shares of Nvidia experienced a plunge on Monday, shedding nearly $600 billion in market value following the release of an advanced AI model by Chinese firm DeepSeek. The unprecedented loss signals a potential shift in the generative AI landscape, as the chinese innovation challenges the dominance of U.S.-led AI development.

Nvidia’s stock closed down 17%, marking its worst single-day percentage loss since March 2020 during the early COVID-19 market crash. According to Forbes, the company’s valuation fell from $3.5 trillion to $2.9 trillion, relinquishing its position as the world’s most valuable company to Apple and Microsoft.

The $589 billion drop represents the largest one-day market value wipeout in history, eclipsing Nvidia’s own $279 billion loss in September 2024 and Meta’s $251 billion decline in February 2022. The broader U.S. stock market also felt the ripple effects, with the S&P 500 down 1.5% and the Nasdaq falling 3.1%. Other technology firms, including chipmakers Arm and Broadcom and data provider Oracle, suffered declines of over 10%.

The DeepSeek disruption

DeepSeek, a relatively unknown AI research lab from China, released its open-source model, R1, which rivals leading models like OpenAI’s o1. Developed at a fraction of the cost, reportedly just $5.6 million, R1 raises questions about the sustainability of Nvidia’s meteoric growth, which has been driven by demand for its GPUs, often priced up to $25,000 each. Nvidia’s net profits soared from $4.8 billion in 2022 to an estimated $66.7 billion in 2024, fuelled by sales to major U.S. firms such as Meta, Tesla, and OpenAI.

While R1 was trained using Nvidia’s GPUs, its cost-efficiency undermines the core thesis of Nvidia’s valuation. 

The release of DeepSeek’s model has shaken confidence in the dominance of U.S. generative AI firms. R1’s efficiency, utilising a fraction of the computational resources needed by comparable models, highlights a shift in AI development strategies. By leveraging cost-effective techniques and open-source collaboration, DeepSeek has disrupted the narrative that AI advancement relies solely on massive hardware investments.

Hugging Face CEO Clem Delangue revealed that developers have created over 500 derivative models of DeepSeek R1, amassing 2.5 million downloads, five times the official model's uptake. 

However, R1 faces scrutiny for aligning with Chinese regulatory standards, declining to answer politically sensitive topics like Tiananmen Square or Taiwan's autonomy.

dv
Image: Tech Crunch

Meanwhile, OpenAI has urged U.S. government support to maintain its AI edge, with VP Chris Lehane highlighting DeepSeek’s parent, High Flyer Capital Management, as a rising concern.

The fall

Nvidia’s $589 billion market cap loss surpasses the individual valuations of major companies such as UnitedHealth, ExxonMobil, and Costco, leaving it with a market value larger than only 13 American firms. 

As U.S. firms re-evaluate their AI strategies in light of DeepSeek’s cost-effective model, Nvidia’s record-breaking loss signals an industry at a crossroads. The AI landscape is evolving rapidly, and the coming months may redefine the balance of power in global innovation.

 

nvidia Chat GPT Open AI DeepSeek AI open source AI