Nvidia faced an unprecedented blow on Monday, with its stock plunging 17%, marking its worst daily percentage loss since March 2020. The company’s market capitalization plummeted by $589 billion, the largest single-day loss ever recorded by a publicly traded company. The dramatic decline followed the release of a groundbreaking large-language model by DeepSeek, a Chinese AI company. This new competitor, developed at a fraction of the cost of U.S.-based AI models, has raised concerns about Nvidia’s long-term dominance in the AI hardware market.
DeepSeek reported spending just $5.6 million on Nvidia GPUs to train its model, a claim that, while likely underestimated, casts doubt on Nvidia’s core business model, which relies on high demand for its premium GPUs. As a result, Nvidia’s valuation dropped from $3.5 trillion to $2.9 trillion, pushing the company behind Apple and Microsoft in market value. The announcement also triggered broader selloffs in U.S. tech stocks, with the S&P 500 dropping 1.5% and the Nasdaq falling 3.1%.
Despite acknowledging DeepSeek’s model as an “excellent AI advancement,” Nvidia’s leadership now faces new questions about how competitive pressures could affect its soaring profits, which jumped from $4.8 billion in 2022 to an estimated $66.7 billion in 2024. Experts warn that if U.S. companies adopt similar cost-effective strategies, Nvidia’s growth trajectory may face significant challenges.
