Nvidia appears poised to face the steepest single-day loss ever recorded for a company, as the emergence of Chinese AI start-up Deepseek rattles the worldwide tech markets. Nvidia, renowned for its pivotal role in the AI stock surge via its cutting-edge processors, watched its shares nosedive by more than 11% on Germany’s Tradegate on Monday.
The chip behemoth, valued at $3.49 trillion (£2.79 trillion), saw its trading price sink to $142.62 (£114.09), marking nearly a ten per cent drop in pre-market activity from Friday's closure and resulting in a staggering $400bn (£319bn) evaporation of its market worth. Concurrently, Nasdaq 100 futures descended by 3.2%, with S&P 500 futures also witnessing a 1.9% reduction early Monday, as reported by .
AJ Bell's analyst Russ Mould offered his perspective: "These market movements suggest investors are worried about disruption to what has so far been an easy ride for most stocks linked to the AI theme."
Not immune to the upheaval, European tech stocks followed NVIDIA's plunge, with ASML's shares diminishing over eight percent. On the flip side, fueled by Deepseek's momentum, Chinese AI equities experienced a boost, nudging the Hang Seng Tech Index higher by two percent.
As Deepseek unveiled its innovative AI model this weekend—portrayed as competition for OpenAI and Meta platforms—sentiment turned anxious with investors spooked by Deepseek's potential disruption. This new model from Deepseek, which garnered acclaim for its cost efficiency and compatibility with lower-end chips, gained popularity swiftly for its analytical capabilities and responsiveness to user prompts.
A new AI player?
Venture capitalist Marc Andreessen has lauded the startup's achievement as "one of the most impressive breakthroughs", leading to its top position in Apple Store rankings for transparency. The AI company's advancements have prompted a re-evaluation among traders regarding the need for Nvidia’s high-powered chips, sparking investor debates over the valuations of AI behemoths like Nvidia and OpenAI.
Bernstein analysts have pointed out that although the startup's models are noteworthy, the market's response might be exaggerated, stating: "If Deepseek has reduced costs by ten times, it’s still worth noting that rising model cost trajectories are unsustainable."
They further emphasised the ongoing importance of AI infrastructure. Nvidia is experiencing a downturn just as the tech sector braces for a crucial week of earnings reports from industry giants such as Apple and Microsoft.
Amidst concerns about decelerating profit growth, Nvidia's fourth consecutive day of losses stands in stark contrast to broader market advances, raising questions about the long-term viability of the AI-centric trend. This period of uncertainty coincides with challenges faced by the Chinese-owned video app TikTok, which recently encountered a temporary ban in the US as American officials intensify efforts to prevent China from accessing Western technology.
Mould commented on the situation, suggesting: "That strategy might have backfired as it looks to have encouraged China to ramp up efforts to build its own technology and we’re now seeing evidence that the country is making waves."
