DeepSeek’s Launch of Cost-Effective AI Assistant in China Causes $593 Billion Loss for Nvidia, Sparks 3.1% Drop in Nasdaq, Shaking Global Markets
Nvidia together with other global markets experienced a $593 billion value drop following DeepSeek AI’s price disruption.
Chinese artificial intelligence startup DeepSeek AI based out of Hangzhou became a major disruptor across the tech industry by offering low-cost services. An exceptional downfall amounted to $593 billion caused major distress to Wall Street’s Silicon Valley giant when the company hit Nvidia chips hard during one trading day. LSEG data shows this single-day market value destruction stands as Wall Street’s biggest recorded equity loss in history.
The Impact on Global Tech Stocks
The market introduction of DeepSeek AI caused Nvidia along with multiple technology stocks to experience sudden market declines. The Nasdaq and S&P 500 experienced abrupt declines during January 27. The Nasdaq suffered a 3.1% decrease in value after Nvidia released its massive financial loss. Following the sharp decline of Nvidia stock a substantial number of major technology businesses dropped in performance including Broadcom Inc. (17.4% decline), Microsoft (2.1%) and Google parent Alphabet (4.2%).
A 9.2% decline in the Philadelphia semiconductor index served as its largest downturn since March 2020. The Nasdaq recorded the biggest decline with Marvell Technology leading the way at 19.1% below its previous record.
What is DeepSeek AI?
DeepSeek AI emerged from the Chinese start-up in Hangzhou as an AI assistant it provides free of charge while achieving extensive market penetration. The Reuters report indicates DeepSeek operates its AI technology with less data requirements than OpenAI’s ChatGPT or Google’s Gemini while maintaining lower operational costs.
The free AI assistant from DeepSeek gained more U.S. iOS App Store downloads than ChatGPT during January 27. DeepSeek AI has surpassed ChatGPT in downloads across multiple regions which include the UK, Australia, Canada, China and Singapore.
The AI models of DeepSeek named DeepSeek-V3 and DeepSeek-R1 continue to generate interest and curiosity. DeepSeek-V3’s development for about $6 million used H800 chips provided by Nvidia which the company obtained through Liang Wenfeng – its co-founder who also established a quantitative hedge fund. The DeepSeek-R1 model costs 20 to 50 times less in usage compared to OpenAI’s GPT-3 model depending on how users deploy it.
How Have Tech Stocks Reacted?
Existing investors responded negatively to DeepSeek AI reaching market dominance. Nvidia’s stock price plummeted 17% on January 27 which spread devastating losses throughout technology sectors. Shares of Broadcom registered a 17.4% decrease alongside Microsoft shares dropping by 2.1% as Alphabet’s stock value fell by 4.2%. Between January and February 2023 the Philadelphia semiconductor index registered its most significant decline since March 2020 when it lost 9.2% value.
Analysis shows Marvell Technology experienced a stock market value drop of 19.1% in its shares. Technology share prices began their downward trajectory first in Asia as SoftBank Group posted a stock value decline of 8.3%. Technology stocks across Europe faced further losses during this period with ASML suffering a 7% drop.
Why Are Investors Concerned?
Investors worry most about U.S. AI technology prices escalating beyond what Chinese AI products apparently charge. The open-source AI platform from DeepSeek delivers affordable technology at a fraction of the regular costs. The U.S. tech giants face possible diminished AI profitability because DeepSeek produces equivalent products while charging prices significantly lower than their products.
The Expert Community Examines DeepSeek AI’s Market Potential
The chief economist of Annex Wealth Management Brian Jacobsen views DeepSeek’s possible factual claims as an industry-defining threat to the existing AI technology infrastructure. The system presents three key implications which can affect chip market demand and minimize power usage for training algorithms alongside lowering the need for massive data center infrastructure he explained.
During his interview with CNN President Donald Trump indicated DeepSeek’s emergence as a “wake-up call” which could turn into something beneficial.
Investors Shift Focus to Safer Assets
unistors followed a market correction of tech stocks by shifting capital towards risk-averse financial instruments. Asset investors chose government bonds and currencies as preferred storage while the U.S. Treasury 10-year yield decreased to 4.53%. Japanese Yen and Swiss Franc achieved strength against their U.S. Dollar counterparts in global currency trading sessions.
The expected heightened market volatility will force banking institutions to modify their risk management procedures. executives at trading companies predict banks will purchase fewer technology stocks or exercise greater caution with their holdings as their clients start selling their stock positions.
The market incidence has caused investors to evaluate their existing holdings while assessing AI technology investments given a lower-cost Chinese alternative. The increasing AI competition between nations will lead worldwide markets to observe American technology companies’ strategic reactions to this emerging competitor.
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