Nvidia saw over $500 billion of its market valuation wiped off as technology stocks globally came under pressure on Monday after China’s DeepSeek unveiled an artificial intelligence model said to be cheaper and less data-hungry than those of its rivals.
The Chinese startup’s free AI open-source assistant was unveiled last week, with a large language model (LLM) matching those of OpenAI but at a tenth of the cost and requiring a fraction of the data.
Analysts noted the release threatened the view that AI would fuel demand for chipmakers to data centres, leaving jitters around big sector names in the crowded space.
Nvidia Corp (NASDAQ:NVDA, ETR:NVD) tumbled 10.8% in early trading on Monday and lost more as the session wore on, with other semiconductor names in Europe and US also falling sharply, extending losses from Friday.
Having dropped as much as 15% by late morning, Nvidia had shed US$513 billion of its valuation alone early on to suffer the largest rout in stock market history, according to Bloomberg.
Its decline meant Nvidia lost its crown as the world's largest company by market cap to Apple Inc, while Microsoft Corp (NASDAQ:MSFT) crept up to second place despite the major OpenAI shareholder facing a stern beating of its own from the market, dropping 3.5% on to lose around $120 billion from its valuation.
ASML Holding NV (NASDAQ:ASML) and ASM International both dropped around 10% in Europe, while Arm Holdings PLC (NASDAQ:ARM), Broadcom Inc (NASDAQ:AVGO, ETR:1YD) and Super Micro Computer Inc (NASDAQ:SMCI) tumbled between 10% and 14% in US pre-market trading, with drops of around 6% for major OpenAI investor Microsoft Corp (NASDAQ:MSFT) and for chipmaker Advanced Micro Devices Inc (NASDAQ:AMD, ETR:AMD).
The Nasdaq 100 shed 2.5% early on Monday as a result, as the S&P 500 and Dow Jones also dropped.
Japanese peer Tokyo Electron Ltd dropped 4.9% in the meantime, as local Nvidia supplier Advantest Corp sunk 8.6% and the Nikkei declined 0.9%.
Chinese tech stocks surged, led by chip specialist Guangzhou Anyka Microelectronics.
“The AI super-race is seeing new challengers emerge and not everyone is going to win,” AJ Bell analyst Russ Mould said.
“The companies that enjoyed first-mover advantage will now be under pressure to launch something even better or be left behind.
“It’s natural evolution - when someone launches a product or service that sees strong demand, someone else will always try to come along with something cheaper to undercut the market leaders.”
Kathleen Brooks, head of research at XTB said "this is causing an existential crisis" for the US stock market, with the emergence of DeepSeek's model "a clear reminder that US AI dominance cannot be taken for granted".
There was some scepticism poured on the sell-off for makers of chips and graphics processing units (GPUs) used to help power AI models.
Citi analyst Atif Malik said: "While DeepSeek's achievement could be groundbreaking, we question the notion that its feats were done without the use of advanced GPUs to fine tune it and/or build the underlying LLMs the final model is based on through the distillation technique."