On Monday morning US stock markets and the Sillion Valley went into a tailspin after a less known Chinese company's new AI model rattled the world with its unprecedented AI innovation. DeepSeek threatened the dominance of AI leaders like Nvidia, evaporating $593 billion of the chipmaker's market value, a record one-day loss for any company on Wall Street.
Global investors dumped tech stocks on Monday leading the tech-heavy Nasdaq to fall 3.1%. Nvidia was the Nasdaq's biggest drag, with its shares tumbling just under 17% and marking a record single-day loss in market capitalization for a Wall Street stock, according to LSEG data. Nvidia's market-cap loss on Monday was more than double the previous one-day record, set by Nvidia last September.
Nvidia Leads the Losses, biggest wipe-out in history
Nvidia, which had thrived on the AI boom, saw its valuation crater as investors reevaluated its dominance. Company's market loss on Monday was more than double the previous one-day record, set by Nvidia last September. On the worst day since pandemic hit the company lost almost $600 billion in market value in the biggest wipe-out in history. The company CEO's losses stretched to $20.1bn.
US stocks ended deep in red
The Nasdaq 100 ended the day with a 3% fall, erasing one year gains and losses upto $1 trillion in one single day. Energy firms expected to profit from unprecedented AI demand sank. The investor pull out indicates their concern over whether billions being spent on AI is worth the gains. "When valuations stretch to the sky it's easier for small trembles to make the entire market rumble," Max Gokhman, senior vice president at Franklin Templeton Investment Solutions told Bloomberg.
Tech Stocks lose trillions
The Nasdaq's next-biggest drag was chipmaker Broadcom Inc , which finished down 17.4%, followed by ChatGPT backer Microsoft, which fell 2.1% and then Google parent Alphabet, which ended down 4.2%. The Philadelphia semiconductor index tumbled 9.2%, for its biggest percentage drop since March 2020 and its biggest decliner was Marvell Technology, which tumbled 19.1%.
DeepSeek: The Disruptive Chinese AI Rival
The catalyst for the US market turmoil was DeepSeek, a Hangzhou-based AI company that has gained international attention for its DeepSeek R1 chatbot. With $5.6 million valuation DeepSeek's success challenges the Silicon Valley narrative that massive capital investment is essential to AI development. "DeepSeek shows that it is possible to develop powerful AI models that cost less," said Vey-Sern Ling, managing director at Union Bancaire Privee was quoted by Bloomberg. "It can potentially derail the investment case for the entire AI supply chain, which is driven by high spending from a small handful of hyperscalers."
Trump calls it a wakeup call
Responding to the crash President Donald Trump stated that Chinese startup DeepSeek's technology should act as spur for American companies and said it was good that companies in China have come up with a cheaper, faster method of artificial intelligence. "The release of DeepSeek, AI from a Chinese company should be a wakeup call for our industries that we need to be laser-focused on competing to win," Trump said in Florida.
AI Billionaires in Crisis
US tech billionaires lost a combined $108 billion. Nvidia's Huang saw his fortune drop 20%, fall of $ 20.1 billion.Larry Ellison of Oracle lost $22.6 billion, marking the largest absolute loss, while Dell Inc.'s Michael Dell shed $13 billion. Changpeng "CZ" Zhao of Binance Holdings lost $12.1 billion as tech and crypto fortunes alike took a hit.
Nvidia hails DeepSeek technology
Nvidia has called DeepSeek's R1 model "an excellent AI advancement," despite the Chinese firm causing the chip maker's stock price to plunge 20%. "DeepSeek is an excellent AI advancement and a perfect example of Test Time Scaling," an Nvidia spokesperson told CNBC. "DeepSeek's work illustrates how new models can be created using that technique, leveraging widely-available models and compute that is fully export control compliant.
Meta's billion dollar spending under scanner
Meta's announcement of a $65 billion AI investment plan, coupled with broader Big Tech spending projected to reach $200 billion by 2025, has faced growing scepticism. DeepSeek's lean development approach offers a stark contrast to Silicon Valley's spend-heavy strategy.
Export Controls and Chinese Innovation
DeepSeek's rise has underscored the ingenuity of Chinese AI developers, who have circumvented U.S. export controls on advanced GPUs. Rumours suggest the company has access to 50,000 Nvidia H100 GPUs, despite sanctions, enabling its rapid technological breakthroughs.
A New Chapter for Global AI
DeepSeek's ascent represents a paradigm shift in AI development. By proving that innovation doesn't require limitless spending, the company has disrupted the global AI narrative, potentially reshaping the competitive landscape for years to come
