Shares of Nvidia (NVDA.O), the poster child of the recent AI boom, plummeted 17% on Monday, erasing a staggering $593 billion from its market value—the largest single-day loss for any company on record.
The selloff was sparked by the launch of DeepSeek, a low-cost AI assistant developed by Hangzhou-based startup DeepSeek. The model, unveiled last week, reportedly operates using significantly less data and at a fraction of the cost of existing services.
OpenAI CEO Sam Altman even praised it as an "impressive model," while welcoming the competition. "We will obviously deliver much better models, but it's invigorating to have a new competitor!" Altman said in a social media post.
Tech Selloff Rattles Global Markets
The ripple effects of DeepSeek's debut were felt globally, with tech stocks from Tokyo to Silicon Valley bearing the brunt of the selloff. In Japan, Nvidia supplier Advantest (6857.T) tumbled 10% on Tuesday, following a nearly 9% drop on Monday. Chip-making equipment producer Tokyo Electron (8035.T) fell 5.3%, while technology investor SoftBank Group (9984.T) lost 6%.
In the U.S., the Philadelphia Semiconductor Index (.SOX) suffered its steepest decline since March 2020, plunging 9.2%. Major tech players also took a hit, with Broadcom (AVGO.O) down 17.4%, Microsoft (MSFT.O) falling 2.1%, and Alphabet (GOOGL.O) declining 4.2%.
Meanwhile, Malaysia's YTL Power (YTLP.KL), which provides infrastructure for data centers, saw its stock drop 7.5%, marking its third consecutive day of losses.
Valuation Concerns and Investor Sentiment
The selloff has reignited concerns about the lofty valuations of AI and tech companies, which have driven market indices to record highs over the past 18 months.
"What makes Monday's tech selloff so jarring is that the valuations of many of these AI and tech companies leave no room for error," said David Bahnsen, Chief Investment Officer at The Bahnsen Group. "The high concentration of these stocks in investor portfolios and indices posed an underappreciated risk."
Jun Rong Yeap, a market strategist at IG, noted a "sell first, think later" mindset among investors, as opinions remain divided on whether DeepSeek will truly be a game-changer for the global AI landscape. "Market participants dislike uncertainties and are clearly unwilling to take risks in the near term," he added.
The Rise of DeepSeek and Its Implications
DeepSeek's AI model, dubbed DeepSeek-V3, was trained using Nvidia's less-capable H800 chips at a cost of under $6 million, according to a research paper published by the company. The model's cost-efficiency and accessibility are raising questions about the sustainability of high-cost AI infrastructure investments by U.S. tech giants.
"This development underscores the intensifying competition in the global AI race," said Charu Chanana, Chief Investment Strategist at Saxo. "DeepSeek's success shows that advanced AI models can be built with more cost-efficient hardware, challenging the dominance of companies like Nvidia."
The Hangzhou-based startup, whose controlling shareholder is Liang Wenfeng, co-founder of quantitative hedge fund High-Flyer, remains relatively low-profile. However, its disruptive potential has put it in the global spotlight.
(With inputs from agencies)
