DeepSeek AI Disrupts Nvidia, Global Tech Stocks with $593 Billion Shockwave

In a groundbreaking development, Chinese startup DeepSeek AI has sent shockwaves across global markets, tanking the valuation of US chip giant Nvidia by $593 billion in a single day. This historic 17% one-day loss marks the largest market capitalization drop in Wall Street history, as per LSEG data.

The ripple effect of this disruption extended beyond Nvidia. The S&P 500 index fell sharply, and the tech-heavy Nasdaq slumped by over 3% on January 27, driven by fears that DeepSeek’s low-cost AI models could upend US dominance in artificial intelligence.

What is DeepSeek AI?

DeepSeek AI, a Hangzhou-based startup, introduced its free AI assistant last week, positioning itself as a cost-effective alternative to major players like OpenAI’s ChatGPT and Google’s Gemini. With its DeepSeek-V3 and DeepSeek-R1 models, the company claims to deliver similar capabilities at a fraction of the cost.

Using Nvidia’s lower-end H800 chips for training, DeepSeek reportedly spent less than $6 million on its flagship model. According to a Reuters report, its latest model, DeepSeek-R1, is 20–50 times cheaper than OpenAI’s offerings, depending on the task.

The startup’s rapid rise has been extraordinary. By January 27, DeepSeek AI surpassed ChatGPT in downloads on the US iOS App Store and has outperformed it in several markets, including the UK, Australia, and Singapore.

Tech Stocks Plummet

Nvidia bore the brunt of the market sell-off, losing 17% of its value overnight. Broadcom, another key chipmaker, fell 17.4%, while other tech giants such as Microsoft and Google parent Alphabet dropped 2.1% and 4.2%, respectively.

The Philadelphia Semiconductor Index recorded a staggering 9.2% decline, its worst percentage drop since March 2020. Other companies deeply affected include Marvell Technology, which tumbled 19.1%, and Japan’s SoftBank, which finished the day 8.3% lower.

Energy stocks also saw significant sell-offs due to lowered projections for data center power demand. Vertiv Holdings plummeted 29.9%, while Constellation Energy and Vistra fell 20.8% and 28.3%, respectively.

Expert Opinions: The “Better Mousetrap”

Brian Jacobsen, chief economist at Annex Wealth Management, described DeepSeek as a potential “better mousetrap” capable of disrupting the AI-driven market narrative of recent years. “If DeepSeek’s claims hold true, this could mean reduced demand for high-end chips, large-scale data centers, and power-intensive AI infrastructure,” he said.

Former US President Donald Trump also weighed in, calling DeepSeek a “wake-up call” for American tech companies to reassess their strategies.

Market Shifts Amid Uncertainty

In the aftermath of the DeepSeek disruption, investors redirected funds to safer assets. The benchmark US Treasury 10-year yield dropped to 4.53%, while safe-haven currencies like the Swiss franc and Japanese yen rallied.

With volatility expected to persist, banks are reportedly reassessing risk management strategies, further contributing to the turmoil in the tech sector.

DeepSeek AI’s emergence signals a pivotal moment in the global AI race, challenging US tech giants to innovate or risk falling behind. Whether this is a temporary setback or the beginning of a significant shift remains to be seen.