By Nvidia lost nearly $600 billion in market value Monday as tech stocks plunged amid fears that Chinese artificial intelligence firm DeepSeek leapfrogged U.S. dominance in AI development.
The Nasdaq Composite, which tracks the country’s largest tech firms, plunged more than 3%. The Dow ended up nearly 300 points after falling earlier in the day, and the S&P 500 tumbled almost 1.5%.
The sell-off was sparked by advances claimed by China’s DeepSeek, whose outstanding qualities became evident this weekend. The open-source model was first released in December, when the company said it took only two months and less than $6 million to create. Those claims would be far less than the hundreds of billions of dollars that American tech giants such as OpenAI, Microsoft, Meta and others have poured into developing their own models, fueling fears that China may be passing the U.S. in the scale and efficiency of their AI investments.
DeepSeek’s app is now the top free app in the Apple App Store, pushing OpenAI’s ChatGPT into second place.
Among the biggest losers in the stock market slump: chipmaker Nvidia, whose shares plummeted as much as 18%. Nvidia has been among the better performers as of late, with shares soaring more than 200% over the course of the last two years, making it one of the largest companies in the world. Nvidia’s losses represent the biggest market value drop in U.S. stock market history, according to Bloomberg.
Nvidia said in a statement that “DeepSeek is an excellent AI advancement” and an example of what is possible, “leveraging widely available models and compute that is fully export control compliant.”
Other semiconductor companies also saw major losses. Micron Technology and Arm Holdings fell 10%, while ASML slid 6%.
Mega-cap tech firms also felt the pain, with Microsoft falling 2% and Google parent, Alphabet, falling 4%. Meta Platforms, which is developing its own open-source AI model, fell earlier in the day but ended higher by 1.9%.
Worries about DeepSeek’s alleged advances come despite export controls on sales of advanced semiconductors to China.
Speaking at the World Economic Forum last week, Microsoft CEO Satya Nadella said DeepSeek’s advances appeared to be “super impressive … and super-compute efficient.” “We should take the developments out of China very, very seriously,” Nadella added.
Rep. John Moolenaar, R-Mich., chairman of the Select Committee on China, said “the U.S. cannot allow CCP models such as DeepSeek to risk our national security and leverage our technology to advance their AI ambitions. We must work to swiftly place stronger export controls on technologies critical to DeepSeek’s AI infrastructure.”
At the end of 2024, Microsoft said it planned $35 billion in investments to build “trusted and secure AI and cloud datacenter infrastructure.”
Constellation Energy, which inked a deal with Microsoft to restart the Three Mile Island nuclear plant to power artificial intelligence servers, sank 20%. Shares of other power companies seen as AI beneficiaries such as Vistra Energy and NRG Energy also dropped sharply. Siemens Energy, which makes equipment for utility companies, plunged 20%. GE Vernova, another maker of power equipment, fell more than 21%.
Not everyone is convinced by DeepSeek’s announcements. “We believe that … DeepSeek did not ‘build OpenAI for $5M,'” Bernstein analyst Stacy Rasgon wrote in a note to clients Monday. “The models look fantastic but we don’t think they are miracles.”
Giuseppe Sette, a president at AI market research firm Reflexivity, said the underlying tech for DeepSeek appears to be “extremely bullish in the long-term” because it could be a playbook for other AI firms going forward.
“DeepSeek has taken the market by storm by doing more with less. In layman terms, they activate only the most relevant portions of their model for each query, and that saves money and computation power. This shows that with AI the surprises will keep on coming in the next few years,” Sette wrote in a note Monday.
