The recent rise of the Chinese company’s AI app, DeepSeek, over the weekend has affected Nvidia’s stock market value, causing it to drop by nearly $600 billion on Monday. This marks the largest single-day loss in US stock market history. Once the most valuable company in the world, Nvidia has now fallen to third place behind Apple and Microsoft. Despite a 17% loss, Nvidia’s decline was not the largest, as Siemens Energy, which had recently benefited from the expected high electricity demand of AI data centers, fell by over 20%.
The day was challenging not only for Nvidia and Siemens Energy. Several companies that had benefited from the AI hype on the stock market faced significant losses. Oracle’s stock fell by 14%, Super Micro Computer by more than 12%, Cisco by 5%, and Microsoft by 2%. According to Bloomberg, the wealth of the world’s 500 richest people decreased by a total of $100 billion in a single day, with Nvidia’s Jen-Hsun Huang and Oracle’s Larry Ellison each losing more than $20 billion.
The cause of this challenging day for the tech industry seems to be the realization that AI software can be trained with significantly less computing power, and thus less Nvidia technology, than previously thought. Allegedly trained for only $5.6 million, two AI models from DeepSeek are said to compete with or surpass the likes of OpenAI. However, it is unclear if DeepSeek’s claims about model training are accurate. Speculation, according to the news agency dpa, suggests that the Chinese company may have access to more Nvidia chips than admitted, despite US sanctions.
It is clear that many investors, who had driven Nvidia’s stock to new heights in recent months, are now suddenly cautious. US President Donald Trump referred to this as a “wake-up call” for the US industry. He stated that DeepSeek’s success shows the need to be extremely competitive to win, as quoted by Bloomberg. Overall, the news from China is seen positively because it suggests that competitive AI technology does not require as much spending. However, this is likely the biggest concern for stock markets.
Opinions on Wall Street are divided regarding DeepSeek’s technology. The Financial Times quotes an analyst stating that the idea that DeepSeek copied OpenAI for $5 million is “absolutely wrong” and not worth further discussion. Another analysis suggests that the development highlights the vulnerability of the AI industry, as it often relies on the assumption that companies have an unassailable lead. There is even the view that this development could ultimately be beneficial for Nvidia, as such advancements from China might encourage more companies to invest in AI.
This situation has sparked a broader conversation about the future of AI and the competitive landscape. As companies navigate these changes, the focus remains on innovation and adaptability. The industry must continue to evolve, ensuring that it can meet the demands of a rapidly changing technological environment.