DeepSeek Sparks AI Stock Selloff, Nvidia Posts Record Market-Cap Loss

Global investors dumped tech stocks on Monday as they worried that the emergence of a low-cost Chinese artificial intelligence model would threaten 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.

Last week, Chinese startup DeepSeek launched a free AI assistant that it says uses less data at a fraction of the cost of incumbent services. By Monday, the assistant had overtaken U.S. rival ChatGPT in downloads from Apple’s.

The price of Bitcoin dipped below $98,000 Monday after DeepSeek, threw a wrench into Wall Street’s favorite narrative. This led the tech-heavy Nasdaq to fall 3.1% on Monday. Nvidia was the Nasdaq’s biggest drag, with its shares tumbling just under 17% and marking a record one-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. 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%.

U.S. equity declines followed a selloff that started in Asia, with Japan’s SoftBank Group finishing down 8.3%, and moved through Europe where ASML fell 7%.

“If it’s true that DeepSeek is the proverbial ‘better mousetrap,’ that could disrupt the entire AI narrative that has helped drive the markets over the last two years,” said Brian Jacobsen, chief economist at Annex Wealth Management in Menomonee Falls, Wisconsin. “

It could mean less demand for chips, less need for a massive build-out of power production to fuel the models, and less need for large-scale data centers.” The hype around AI has powered a huge inflow of capital into equities in the last 18 months, inflating valuations and lifting stock markets to new highs.

Terron Gold