The US microchip manufacturing giant Nvidia faced a record one-day drop in market capitalization – losing 600 billion dollars. According to Financial Times, the company's shares fell by 17.8%, resulting in a decrease in capitalization to 620 billion dollars reduction.
This was due to the success of the Chinese artificial intelligence (AI) startup DeepSeek. Despite only spending 6 million dollars compared to the billions spent by the US on the less efficient ChatGPT AI chatbot, DeepSeek has emerged as a formidable competitor, outperforming all existing AI programs on the market, and its free chatbot began to overshadow technological giants around the world. Importantly, DeepSeek does not require as powerful chips. Consequently, Nvidia, which has been dominating the market and becoming increasingly valuable day by day, saw its shares become redundant and drop in price, leading to a 600 billion dollar reduction in its market value in just one day.
This situation, namely DeepSeek chatbot's development of a powerful AI model with a relatively small budget, has raised questions among global investors about the vast amounts of money Nvidia and other tech giants are spending on chip manufacturing.
According to Bloomberg agency, DeepSeek's new artificial intelligence model has climbed the charts in the AppStore in terms of downloads, raising further doubts regarding the large investments made in technology by companies such as Microsoft and Alphabet, as highlighted by Weisern Ling, managing director at Union Bancaire Privee, who pointed out that DeepSeek has proven powerful AI models can be developed with less expenditure.
DeepSeek's new model is considered a competitor to the latest developments of companies like OpenAI and Meta. Famous investor Mark Andreessen called this development "one of the astonishing and impressive achievements."
According to Bloomberg, DeepSeek's success has also impacted other sectors. Notably, the stocks of energy companies have fallen due to concerns over reduced demand for electricity by data centers.
Nvidia's previous record capitalization loss occurred in September 2024, when the company lost 279 billion dollars. This incident was connected with analysts' opinions that the hype around AI was excessive and that the expected economic changes from technologies would take a long time to materialize.
Latest reports indicate that Nasdaq 100 index futures have fallen more than 5%, while S&P 500 contracts have decreased by 3%. Additionally, the dispute between US President Donald Trump and Colombia, as well as the anticipated financial reports of the "Magnificent Seven" companies, have negatively affected market sentiment.
This situation indicates the start of another cold war between the US and China – an AI war. It should be reminded that US President Donald Trump announced on January 21 the establishment of Stargate company and an investment up to 500 billion dollars in the development of AI.
Abdulloh Sayyid
