Nvidia hit a questionable Wall Street record Monday, as the stock at the forefront of the U.S.-led artificial intelligence revolution was spooked by DeepSeek, a Chinese AI firm that produced a ChatGPT rival at a fraction of the claimed cost of its American competitors.
Nvidia shares fell 17% by the close, the largest daily percentage loss since March 2020, when stocks momentarily plummeted at the commencement of the COVID-19 epidemic.
Nvidia’s market capitalization fell by $589 billion on Monday, the single greatest one-day value wipeout of any company in history, more than doubling the $279 billion market cap lost by none other than Nvidia on September 3, 2024.
The decline dethroned Nvidia as the world’s most valuable corporation, lowering its valuation from $3.5 trillion to $2.9 trillion, less than Apple and Microsoft.
Nvidia led larger U.S. market losses, with the benchmark S&P 500 falling 1.5% and the tech-heavy Nasdaq falling 3.1%, while other significant AI technology providers, including fellow chip makers Arm and Broadcom, as well as data storage company Oracle, all plunged at least 10%.
In an afternoon statement, an Nvidia spokesman described DeepSeek’s model as a “excellent AI advancement” that is “fully export control compliant” despite still requiring “significant numbers” of Nvidia graphics processing units (GPUs).
Why Nvidia Stock Fell
The unveiling of DeepSeek’s large-language model, which rocked faith in the United States’ superiority in generative AI, may not appear to be a bad catalyst for Nvidia at first glance, given that DeepSeek’s model was trained on Nvidia GPUs, as are most other advanced AI systems. However, the Chinese company stated that it spent only $5.6 million on Nvidia technology to construct its large-language model. While experts believe this is a major underestimation, it still challenges the main theory underlying Nvidia stock’s rapid climb.Nvidia’s net profits increased from $4.8 billion in 2022 to an expected $66.7 billion in 2024, owing in large part to demand for its GPUs, which may cost up to $25,000 each, from American tech behemoths such as Facebook parent Meta, Tesla, and ChatGPT creator OpenAI. According to Ed Yardeni of Yardeni Research, if major US IT companies learn from DeepSeek and construct AI systems with lower-cost GPUs, it may not be a positive development for Nvidia.
A surprising fact
Nvidia’s roughly $600 billion market cap loss on Monday exceeds the individual market values of all but 13 American corporations, as well as the market capitalizations of titans such as health insurer UnitedHealth, oil behemoth Exxon Mobil, and retailer Costco.
Forbes valuation
According to Forbes calculations, Nvidia CEO Jensen Huang’s net worth decreased by $21 billion on Monday, falling from $124.4 billion to $103.1 billion. Huang is Nvidia’s largest individual stakeholder, with a 3% interest in the Silicon Valley company.
