Chinese AI DeepSeek Causes Biggest Ever Single Day M-Cap Loss on Wall Street, Nvidia Tumbles 16.92% Overnight

In the fast-paced world of Artificial Intelligence (AI), Nvidia has long been a dominant force. Known for its cutting-edge tech chips and groundbreaking innovations, Nvidia seemed unstoppable. However, the rise of a low-cost Chinese AI model, Deepseek, has sent shockwaves through the US stock market, causing Nvidia’s value to plummet by 16.92% overnight. This unprecedented drop wiped out a staggering $593 billion from Nvidia’s market cap, marking the largest one-day loss for any Wall Street stock in history.

The ripple effect of Deepseek’s disruption wasn’t limited to Nvidia. The S&P 500 and Nasdaq also took significant hits, with the latter dropping over 3%. The fear? A cost-effective Chinese AI alternative, available as open-source, is challenging the expensive US-led AI advancements. Let’s dive deeper into how Deepseek’s rise has rattled global tech stocks and reshaped the AI landscape.

How Deepseek’s AI Innovation Shook Nvidia and US Stocks

Deepseek, a Chinese AI startup, recently launched a free AI assistant that claims to outperform existing models like OpenAI’s ChatGPT and Google’s Gemini. What sets Deepseek apart is its ability to deliver comparable results at a fraction of the cost. 

This rapid adoption sent alarm bells ringing across the tech industry. Nvidia, a key player in AI chip manufacturing, was hit the hardest. Its stock plummeted by 16.92%, dragging down other tech giants like Microsoft, Alphabet (Google’s parent company), and Broadcom Inc. The Nasdaq, heavily weighted with tech stocks, fell by 3.1%, reflecting widespread investor anxiety.

The Cost Advantage of Deepseek’s AI Models

Deepseek’s success lies in its cost-efficient AI models, DeepSeek-V3 and DeepSeek-R1. According to researchers, DeepSeek-V3, launched on January 10, was trained using Nvidia’s lower-capability H800 chips, costing less than $6 million. DeepSeek-R1, released shortly after, is reportedly 20 to 50 times cheaper to operate than OpenAI’s models, depending on the task.

This affordability has made Deepseek a formidable competitor in the AI space. By leveraging open-source technology and minimising costs, the Chinese startup has challenged the dominance of US-based AI giants, forcing a reevaluation of market strategies.

Global Reactions and Market Fallout

The impact of Deepseek’s rise has been felt worldwide. US President Donald Trump called it a “wakeup call,” suggesting it could spur positive developments in the AI sector. Meanwhile, investors are grappling with the implications of a low-cost AI alternative disrupting the market.

Nvidia’s record-breaking stock drop is a stark reminder of the volatility in the tech industry. As Chinese AI continues to gain traction, US companies may need to rethink their approach to stay competitive.

Cyber Attacks on Deepseek

Despite its early success, DeepSeek has faced significant challenges. Reports suggest the startup has been targeted by large-scale cyberattacks. While the company has managed to thwart these threats, it has temporarily halted some operations to address vulnerabilities.

Deepseek’s rise has undeniably shaken the foundations of the AI industry. By offering a cost-effective alternative to expensive US-led technologies, the Chinese startup has disrupted global markets and challenged established players like Nvidia. As the AI race heats up, one thing is clear: innovation and affordability will be key to staying ahead in this rapidly evolving landscape.