Nvidia Loses Over $589 Billion in Market Value Following Rise of China’s DeepSeek

US tech giant Nvidia saw its stock drop nearly 17% on Monday, triggering a sell-off across AI-related stocks, following the sudden rise in prominence of the Chinese AI chatbot DeepSeek.

Nvidia’s market value plunged by $589 billion in a single day, marking the largest one-day loss in stock market history.

DeepSeek, a Chinese-developed AI model, launched its latest version, DeepSeek-R1, on January 20. The app quickly became the most downloaded free app in the US. Developed at a fraction of the cost of its American counterparts, DeepSeek’s emergence has raised concerns about the future of AI investments and the dominance of US companies in the field.

Researchers behind DeepSeek claim that the model was trained at a cost of just $6 million, a stark contrast to the estimated $100 million required to train OpenAI’s GPT-4.

“If DeepSeek’s innovations are adopted broadly, training costs could come down significantly,” said Raymond James analyst Srini Pajjuri, though he cautioned that this may accelerate efforts by US firms to leverage their access to advanced chips to maintain a competitive edge.

Marc Andreessen, a Silicon Valley venture capitalist and adviser to President Donald Trump, referred to DeepSeek-R1 as “AI’s Sputnik moment,” drawing a parallel to the shock caused by the Soviet Union’s 1957 satellite launch.

The ripple effects of DeepSeek’s rise were felt across the tech sector. Nvidia’s competitor Broadcom saw its stock drop 17.4%, while Micron fell 12% and Advanced Micro Devices dropped more than 6%. Major tech companies like Microsoft and Alphabet, Google’s parent company, also experienced declines of 2.14% and over 4%, respectively.

In Europe, Dutch chip equipment maker ASML saw a 7% drop in share price, while Siemens Energy, a producer of AI-related hardware, faced a staggering 20% decline.

DeepSeek’s sudden rise to prominence has sparked debates about the efficiency of AI models and their implications for the industry. Vey-Sern Ling, a Singapore-based tech equity adviser, suggested that the app’s emergence “could potentially derail the investment case for the entire AI supply chain.”

However, some analysts remain skeptical of DeepSeek’s cost claims. Stacy Rasgon, an analyst at Bernstein, noted that the reported $6 million training cost likely does not account for additional expenses, such as prior research and algorithm development.

“This announcement is not really worthy of the hysteria that has taken over the Twitterverse,” Rasgon added.

Meanwhile, Nvidia issued a statement describing DeepSeek-R1 as “an excellent AI advancement” but appeared unfazed by the competition.

DeepSeek’s launch coincides with heightened restrictions on the export of advanced US chip technology to China, complicating the AI landscape. The Biden administration had tightened these rules, limiting China’s access to Nvidia chips and advanced chipmaking technology.

Despite these challenges, Chinese developers like DeepSeek have found innovative ways to adapt, using open-source software and exploring lower-cost approaches to AI.

Liang Wenfeng, DeepSeek’s founder, reportedly built up a stockpile of Nvidia A100 chips before the US imposed export restrictions. He combined these chips with less advanced ones to train his model cost-effectively.

The rise of DeepSeek comes at a time when the US is making significant efforts to bolster its own AI infrastructure. Last week, President Trump announced the Stargate AI project, which involves an immediate $100 billion investment in data centers and infrastructure, with plans to allocate an additional $400 billion over the next four years.

The initiative aims to secure America’s dominance in the AI space, with backing from SoftBank, Oracle, OpenAI, and UAE-based MGX.

DeepSeek, founded in 2023 by Liang Wenfeng in Hangzhou, China, continues to challenge the industry with its low-cost AI model. However, questions remain about the long-term implications of its innovations and whether Chinese AI firms can sustain their progress amid ongoing US export restrictions.