DeepSeek’s rise triggers Nvidia’s biggest-ever $600 billion market crash

The drop rippled through the broader market, given Nvidia’s weight in major indices. The S&P 500 fell as much as 2.3%, while the Nasdaq 100 tumbled 3.6% before paring losses. According to Bloomberg data, Nvidia’s sell-offs have now triggered eight of the top ten largest one-day drops in the S&P 500 Index by market value.

The steep decline follows the rise of DeepSeek, a Chinese AI company whose low-cost, open-source AI model has sparked fears of an industry-wide shift. DeepSeek’s latest offering, released last week, has drawn comparisons to products from OpenAI and Meta Platforms Inc., delivering competitive performance at a fraction of the cost.

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“Concerns have immediately emerged that it could be a disruptor to the current AI business model, which relies on high-end chips and extensive computing power – and hence energy,” Jefferies analysts wrote in a note to clients, reported Bloomberg.

Analysts at Cantor wrote in a report Monday that the release of DeepSeek’s latest technology has caused “great angst as to the impact for compute demand, and therefore, fears of peak spending on GPUs.”

Founded by quant-fund chief Liang Wenfeng, DeepSeek’s model has already surged to the top of Apple Inc.’s App Store rankings, raising alarms across Silicon Valley.

Nvidia, a major beneficiary of surging AI investment due to its advanced semiconductor designs, now faces increased scrutiny from investors wary of over-expenditure in the sector. While AI spending remains robust, the emergence of lower-cost alternatives like DeepSeek has sparked fears that companies pouring billions into AI development may struggle to justify returns.

Adding to the pressure, Meta Platforms announced plans last Friday to boost AI-related capital expenditures by 50% to $65 billion, while OpenAI, SoftBank Group Corp., and Oracle Corp. unveiled a $100 billion joint venture, Stargate, aimed at developing data centres and AI infrastructure in the US.

DeepSeek’s rise also highlights a broader geopolitical dimension. Despite US export bans on advanced semiconductor technologies to China, the startup’s progress suggests Chinese engineers have found ways to innovate using limited resources.

“The success of DeepSeek underscores a potential shift in the AI arms race, where efficiency trumps access to cutting-edge hardware,” analysts observed.

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