Nvidia has suffered the largest one-day market value decline in US history, losing nearly $600 billion after its stock price dropped 17% to $118.58. This sharp decline was triggered by the release of the open-source R1 AI model from Chinese startup DeepSeek, which sent shockwaves through the industry. The crash marked Nvidia’s worst market day since March 16, 2020, at the start of the pandemic. As a result, the company’s valuation fell from $3.5 trillion to $2.9 trillion, causing it to lose its position as the world’s most valuable company, now trailing behind Apple and Microsoft.
Table of Contents
- Background of Market Crash Affecting NVidia
- What is DeepSeek?
- Investor Fear and its Impact?
- Response from Popular Figures in AI Creation
1. Background of Market Crash Affecting NVidia
Nvidia’s market crash was driven by the launch of DeepSeek’s free, open-source large language model, R1, which debuted last week and quickly became the top app in the US Apple App Store. The model’s release sent shockwaves through the AI industry, raising concerns about competition and cost efficiency in AI development.
2. What is DeepSeek?
DeepSeek, a China-based firm, claims it trained R1 using 671 billion parameters with just 2,048 Nvidia H800 GPUs and a budget of $5.6 million—figures that are significantly lower than the billions spent by tech giants like Alphabet, Meta, and Amazon on their AI systems.
DeepSeek’s AI capabilities are reportedly on par with some of the best models available, including those from OpenAI. What makes this achievement even more remarkable is that the company developed its model despite restrictions imposed by US export sanctions on China, limiting access to cutting-edge AI hardware.
The success of DeepSeek’s R1 model has raised concerns within the market about the future of AI development costs. The ability to create high-end AI tools without the need for billions of dollars in investment challenges the dominance of major tech firms and the reliance on Nvidia’s most expensive flagship GPUs.
3. Investor Fear and its Impact?
Investors fear that other companies will follow DeepSeek’s example, leading to a shift in AI hardware demand. If more firms can develop powerful AI models with fewer resources, Nvidia’s position as the go-to supplier for AI computing could weaken, contributing to the recent stock market turmoil.
The impact of DeepSeek’s AI breakthrough extended beyond Nvidia, causing a ripple effect across the tech industry. Major companies such as Arm, Broadcom, and Oracle saw their share prices drop by at least 10%. According to the Financial Post, the total market capitalization losses across US and European tech firms could surpass $1 trillion.
4. Response from Popular Figures in AI Creation
Despite the market turmoil, DeepSeek’s achievements have garnered widespread praise, even from key figures in Silicon Valley. Venture capitalist Marc Andreessen and OpenAI CEO Sam Altman have both acknowledged the significance of the R1 model, with Altman calling it an “impressive model.”
Sam Altman welcomed the competition, stating, “We will obviously deliver much better models and also it’s legit invigorating to have a new competitor!” His response highlights the increasing rivalry in the AI space, as companies race to develop more powerful and cost-effective models.
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