Nvidia's billion-dollar loss as DeepSeek shakes up AI market

Nvidia’s massive decline reignites discussions on AI investments, highlighting its impact on the S&P 500 and fueling concerns over its strategy amidst growing global AI competition

Nvidia Corp., the global leader in advanced chipmaking, suffered a staggering blow on Monday (January 27), with its stock plummeting by 13%—erasing approximately $465 billion in market capitalization. This marks the largest single-day market value loss in the company's history, exceeding its previous 9% drop in September, which wiped out $279 billion. The shockwaves extended to broader markets, causing a 2.3% decline in the S&P 500 and a 3.6% drop in the Nasdaq 100.

The dramatic selloff comes in the wake of rising competition from DeepSeek, a Chinese AI startup that has launched a cost-effective alternative to Nvidia’s AI solutions. DeepSeek’s latest model, the DeepSeek-V3, has been hailed as a game-changer in the AI sector. Built on a modest $5.6 million investment, it delivers robust performance without relying on high-end chips like Nvidia’s GPUs, which power AI for companies like Meta and Amazon. DeepSeek's affordability and efficiency have sparked concerns that Nvidia's dominance in AI hardware could face significant disruption.

DeepSeek's rise challenges AI investment strategies

DeepSeek-V3, now topping Apple Inc.’s App Store rankings, operates on open-source principles, making it more accessible for a wide range of businesses. The technology has fuelled debates about whether US tech companies have overinvested in high-cost AI models when more economical solutions can achieve comparable results. The startup’s rapid rise has put the spotlight on founder Liang Wenfeng, who has positioned DeepSeek as a serious competitor to established players like OpenAI and Meta Platforms Inc.

The ripple effects of Nvidia’s downturn have reignited discussions on the future of AI investments. Analysts note that Nvidia-related selloffs have historically contributed to some of the largest one-day declines in the S&P 500, underscoring the company’s influence on global markets. This latest crash has amplified scrutiny of its strategy, particularly as global competition intensifies in the AI space.

Meanwhile, industry observers have highlighted the geopolitical implications of DeepSeek’s success. The White House’s AI leadership has pointed to the startup’s rise as evidence of the fierce global race for AI innovation. As companies and governments alike prioritize advancements in artificial intelligence, the competitive dynamics between US and Chinese firms are likely to reshape the sector.

Nvidia’s market dominance is now being challenged on multiple fronts, forcing the company to reassess its strategy as it navigates an increasingly competitive and uncertain landscape.