Nvidia, once the crown jewel of the AI boom, faced an
unprecedented $560 billion loss in market value Monday, marking the largest
one-day drop in US stock market history, Bloomberg reported.
What is Behind Nvidia Stock Fall
The selloff was sparked by mounting investor concerns
over Chinese AI startup DeepSeek, whose low-cost approach to artificial intelligence is shaking up the competitive landscape and challenging Nvidia’s
dominance.
The semiconductor giant’s stock reportedly plummeted
as much as 18%, its worst drop since March 2020, leaving an indelible mark on
the broader market. Nvidia’s influence on major indexes also amplified the
impact, with the S&P 500 shedding 2.3% and the Nasdaq 100 tumbling 3.6%
before recovering slightly, according to Bloomberg report.
DeepSeek, led by quant-fund chief Liang Wenfeng, has emerged as a formidable competitor with its latest AI model. Released last
week, the model is open-sourced and has quickly risen to the top of Apple’s App
Store rankings.
Nvidia’s reliance on AI spending has made it a
bechmark for the tech sector. The company’s chips are important to AI
development. However, DeepSeek’s progress has brought concerns as t
whether whether Western firms have overinvested in costly AI projects.
US vs. China in the AI Race
The geopolitical undercurrent is impossible to ignore.
The US has sought to limit China’s progress in AI by banning the export of
advanced semiconductors and restricting Nvidia’s AI chip sales. However,
DeepSeek’s success signals that China may have found a way to bypass these
restrictions by focusing on efficiency and innovation with limited resources.
🚨🇺🇸 NVIDIA TO CHINESE AI RIVAL: NICE TRY, BUT YOU STILL NEED OUR CHIPSAfter a 17% stock tumble, Nvidia reminded everyone that DeepSeek’s AI success only proves how vital its GPUs are.“Inference requires significant numbers of Nvidia GPUs,” they said—because even AI… pic.twitter.com/51FGiJwFzg
— Mario Nawfal (@MarioNawfal) January 27, 2025
Similarly, OpenAI and its partners, including SoftBank
and Oracle, have committed $100 billion to develop AI infrastructure across the
US. While the AI boom continues to drive major investments, Nvidia’s record loss
could impact the future of the industry.
Investors are increasingly wary of companies that fail
to show sufficient returns on massive capital expenditures. With the rise of
cost-efficient competitors like DeepSeek, the AI industry may be approaching a
critical inflection point.
As the dust settles, Nvidia’s historic plunge
underscores the challenges of maintaining dominance in a rapidly evolving AI
landscape, where innovation is no longer exclusive to Silicon Valley.
This article was written by Jared Kirui at www.financemagnates.com.
Source link
