As computer stocks fell Monday due to concerns that Chinese artificial intelligence company DeepSeekleap was surpassing the United States in AI development, Nvidia’s market value dropped by around $600 billion.
The nation’s biggest tech companies are tracked by the Nasdaq Composite, which fell more than 3%. The S&P 500 fell over 1.5%, and the Dow closed the day up nearly 300 points after dropping earlier in the day.
China’s DeepSeek, which revealed an open-source AI model in December after claiming that it took just two months and less than $6 million to develop, was the catalyst for the sell-off. Concerns that China may surpass the United States in the scope and effectiveness of its AI efforts are fueled by the fact that those claims would be significantly less than the hundreds of billions of dollars that American tech companies like OpenAI, Microsoft, Meta, and others have invested in creating their own models.
The DeepSeek app has surpassed OpenAI’s ChatGPT to become the most popular free app in the Apple App Store.
Chipmaker Nvidia was one of the largest losses in the stock market meltdown, with shares falling as much as 18%. With shares rising more than 200% over the last two years, Nvidia has been one of the better performers lately and is now among the biggest corporations in the world.According to Bloomberg, Nvidia’s losses amount to the largest decline in market value in the history of the US stock market.
According to a statement from Nvidia, “DeepSeek is an excellent AI advancement” and “is an example of what is possible,” utilizing publicly accessible models and fully export control compliant computation.
Significant losses were also incurred by other semiconductor businesses. ASML dropped 6%, while Micron Technology and Arm Holdings plunged 10%.
The impact was also felt by mega-cap tech companies, as Alphabet, the parent company of Google, fell 4% and Microsoft fell 2%. After declining earlier in the day, Meta Platforms, which is creating its own open-source AI model, closed the day 1.9% higher.
Despite export restrictions on the selling of sophisticated semiconductors to China, concerns have been raised regarding DeepSeek’s purported advancements.
According to Microsoft CEO Satya Nadella, who spoke at the World Economic Forum last week, DeepSeek’s advancements seem “super impressive… and super-compute efficient.” “We should take the developments out of China very, very seriously,” said Nadella.
“The United States cannot permit CCP models like DeepSeek to jeopardize our national security and use our technology to further their AI aspirations,” stated Rep. John Moolenaar, R-Michigan, who chairs the Select Committee on China. Stronger export regulations on technologies essential to DeepSeek’s AI infrastructure must be implemented as soon as possible.
Microsoft stated that it would invest $35 billion by the end of 2024 to create “trusted and secure AI and cloud datacenter infrastructure.”
Constellation Energy fell 20% after signing an agreement with Microsoft to rebuild the nuclear facility at Three Mile Island to power AI computers. The stock of other electricity providers that are thought to benefit from AI, such Vistra Energy and NRG Energy, also fell precipitously. Siemens Energy, a manufacturer of equipment for utilities, had a 20% decline. Another manufacturer of power equipment, GE Vernova, saw a decline of over 21%.
The announcements made by DeepSeek have not convinced everyone. According to a note sent to clients on Monday by Bernstein analyst Stacy Rasgon, “We believe that… DeepSeek did not ‘build OpenAI for $5M.” “The models look fantastic but we don’t think they are miracles.”
According to Giuseppe Sette, head of the AI market research firm Reflexivity, DeepSeek’s underlying technology is “extremely bullish in the long-term” because it may serve as a model for future AI companies.
DeepSeek’s ability to accomplish more with less has caused it to take the market by storm. To put it simply, they save money and processing resources by only activating the most pertinent parts of their model for every query. This demonstrates that in the next years, there will be more surprises with AI,” Sette noted in a message on Monday.