Global investors turned bearish on technology stocks on Monday, triggered by concerns that a low-cost Chinese artificial intelligence (AI) model could undermine the dominance of established players like Nvidia. The sell-off resulted in a historic $593 billion loss in Nvidia’s market value, marking the largest single-day loss ever recorded by a company on Wall Street.
The upheaval began last week when DeepSeek, a Chinese startup, unveiled a free AI assistant. According to the company, this new model operates with significantly less data at a fraction of the cost compared to existing services. By Monday, DeepSeek’s assistant had surpassed its American rival, ChatGPT, in downloads from Apple App Store.
The ripple effect was felt across the tech-heavy Nasdaq, which declined 3.1% on Monday. Nvidia led the downturn, with its shares plunging nearly 17%. This marked a record one-day market-cap loss for any Wall Street stock, according to data from LSEG, and more than doubled Nvidia’s previous single-day record loss set in September.
Other tech giants also suffered. Broadcom Inc shares dropped 17.4%, Microsoft, a key backer of ChatGPT, shed 2.1%, while Alphabet, Google’s parent company, slid 4.2%. The broader Philadelphia semiconductor index fell 9.2%, its steepest percentage decline since March 2020. The hardest hit within the index was Marvell Technology, which plummeted 19.1%.
The sell-off began in Asian markets, where Japan’s SoftBank Group closed 8.3% lower, before spreading to European markets, which saw a 7% drop.
DeepSeek truly represents a superior alternative, it could challenge the prevailing AI landscape that has fuelled market gains over the past two years, commented Brian Jacobsen, chief economist at Annex Wealth Management in Wisconsin. He added, “This could reduce demand for chips, curtail the need for large-scale data centres, and slow the expansion of power infrastructure essential for AI development.”
The excitement surrounding AI had driven massive inflows of capital into equity markets over the past 18 months, significantly inflating valuations and propelling stock indices to record highs. As recently as last week, U.S. AI stocks had rallied after former President Donald Trump announced a $500 billion private-sector AI infrastructure initiative under a joint venture called Stargate.
However, the emergence of DeepSeek’s innovative, cost-effective AI model has raised questions about the sustainability of these valuations and could signal a turning point for global tech markets.
