Global markets were rattled on Monday as investors dumped tech stocks, spurred by fears that a low-cost Chinese artificial intelligence model could upend the dominance of industry leaders. Nvidia (NVDA.O) bore the brunt of the selloff, with its market value evaporating by a staggering $593 billion—a record one-day loss for any company in Wall Street history.
The upheaval followed the launch of DeepSeek, a Chinese startup’s free AI assistant, which has quickly surpassed ChatGPT in downloads on Apple’s (AAPL.O) App Store. DeepSeek’s cost-efficient AI model, reportedly 20-50 times cheaper to operate than OpenAI’s, has drawn praise as a game-changer, with some calling it AI’s “Sputnik moment.”
The Nasdaq Composite Index (.IXIC) tumbled 3.1%, driven by sharp declines in major AI-related stocks. Nvidia plunged nearly 17%, Broadcom Inc (AVGO.O) dropped 17.4%, and Alphabet (GOOGL.O) slid 4.2%. The Philadelphia Semiconductor Index (.SOX) experienced its worst percentage drop since March 2020, plummeting 9.2%.
DeepSeek’s breakthrough, achieved using lower-cost Nvidia chips, has cast doubt on the scale of future demand for high-end semiconductor technology, a cornerstone of the recent AI investment boom. “If DeepSeek truly represents a better mousetrap, it could rewrite the AI narrative that has driven markets over the last two years,” said Brian Jacobsen, chief economist at Annex Wealth Management.
Silicon Valley investors praised DeepSeek’s achievements but voiced concerns about its implications for U.S. tech giants. Nvidia’s Daniel Morgan dismissed Monday’s selloff as an overreaction, arguing that DeepSeek’s focus on mobile AI is unlikely to threaten the lucrative data center chip market.
The turbulence highlights the fragility of tech valuations, inflated by recent AI enthusiasm. While Nvidia stock recovered 2.5% in after-hours trading, the broader sector remains under pressure as investors reevaluate the AI landscape.
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