Nvidia Shares Plunge 11% as Chinese AI Startup DeepSeek Sparks Market Disruption
Nvidia Corporation faced a significant market shock today as its shares dropped 11.13% in premarket trading on the Nasdaq. The decline, equivalent to $15.87, saw Nvidia’s stock priced at $126.75 as of 4 pm IST (5:29 am ET). The slide comes in the wake of Chinese artificial intelligence (AI) startup DeepSeek unveiling a groundbreaking AI model that directly challenges Western tech giants in both performance and cost.
Nasdaq Under Pressure Amid AI Competition
The tech-heavy Nasdaq Composite Index also showed signs of strain, dropping 0.50%, or 99.38 points, to settle at 19,954.30. Nvidia’s performance had a cascading effect on the broader market sentiment, as investors grew increasingly wary of rising competition in the AI space.
DeepSeek: The Emerging AI Powerhouse
Founded by Liang Wenfeng, a prominent Quant fund chief, DeepSeek recently launched its latest AI model, which has quickly gained global attention. Despite the U.S. ban on advanced semiconductor exports to China, DeepSeek’s open-source AI product is proving to be a formidable contender in the AI landscape.
The model’s efficiency and affordability have propelled its app to the top of Apple Inc.’s App Store rankings, underscoring its popularity and market potential. Analysts fear that such advancements could disrupt the current AI industry, which depends heavily on high-performance chips like those produced by Nvidia, as well as massive computational power and energy consumption.
Jefferies Analysts Highlight Disruption Risks
In a client note, Jefferies analysts remarked that DeepSeek’s entry raises concerns about the sustainability of the current AI business model. Nvidia, which dominates the market for high-end AI chips, faces potential challenges as companies like DeepSeek leverage alternative, cost-effective technologies.
The report also highlighted the energy-efficient approach of DeepSeek’s AI model, which could pose a long-term threat to established players dependent on resource-intensive operations.
Export Restrictions Fail to Halt DeepSeek’s Rise
Despite U.S. export restrictions on advanced AI technologies to China, including limits on Nvidia’s cutting-edge AI chips, DeepSeek’s rapid ascent demonstrates the resilience and innovation of Chinese startups. The Netherlands-based ASML, another key player in the semiconductor industry, has also faced pressure, with its stock experiencing a downturn. The Dutch government, under pressure from the Biden administration, had imposed restrictions on exporting immersion deep ultraviolet lithography systems to China.
Implications for the Global AI Industry
DeepSeek’s emergence signals a potential shift in the global AI competitive landscape, challenging established players like Nvidia, OpenAI, and Meta Platforms Inc. While Nvidia remains a market leader in AI hardware, the rise of cost-efficient competitors could reshape the future of AI technologies and their applications.
As the AI market evolves, companies and investors will need to adapt to the new dynamics brought by startups like DeepSeek, whose innovative approaches could redefine the boundaries of artificial intelligence development and deployment.
