Nvidia Stock Price Colossally Crashes After New DeepSeek AI Model Emerges

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Despite being among the largest firms globally by market value, Nvidia is facing a challenging day on the stock exchange today. The company’s share price dropped significantly, approximately 17%, which translates to an erasure of over $500 billion in market cap. If this trend persists until the end of trading hours, it would set a new record for the largest single-day trading loss ever experienced by a corporation. Currently, Nvidia’s previous one-day dip of $279 billion stands as the benchmark for such losses.

It seems that Nvidia’s stock is experiencing a decline. For the past two years, the stock had been steadily rising as investors showed optimism towards the company’s prospects in the field of artificial intelligence. This bullish sentiment stemmed from market enthusiasm about AI. Notably, Nvidia produces the Graphics Processing Units (GPUs) essential for training large-scale language models and other general AI applications.

At the close of the previous week, DeepSeek, a Chinese artificial intelligence startup, introduced a new model, R1. The company asserts that this model is significantly less expensive compared to other models available on the market, even Open AI’s o1. However, investors appear concerned that AI companies might not need as much computational power as previously thought. This potential revelation could have caused unease among investors and contributed to a decrease in Nvidia’s stock price.

On Monday, some competing companies in the AI sector, such as Arm and Broadcom, experienced a drop in their stock prices. Stock values can fluctuate frequently, at times quite significantly, due to important market updates.

As an enthusiast, I’d like to share that DeepSeek isn’t a fresh face, but rather emerged post-spinoff from High-Flyer Hedge Fund in 2023. In their own words, their R1 model was developed at a cost of approximately $5.6 million – a fraction compared to what OpenAI and others are reported to have invested in their respective systems. With DeepSeek’s software advancements potentially reducing dependence on hardware like Nvidia GPUs, some experts speculate that DeepSeek could herald a significant shift within the AI landscape.

DeepSeek’s latest model has been introduced shortly following President Trump’s announcement of the Stargate AI infrastructure initiative, worth $500 billion, which seems to include some funds that had already been pledged earlier. OpenAI, Oracle, and SoftBank are among its key investors.

According to The Motley Fool, some people question DeepSeek’s transparency regarding the actual costs associated with their systems. Nathan Lampert, an AI researcher, estimates that DeepSeek’s true training expenses could amount to as much as a billion dollars. Meanwhile, Alexandr Wang, CEO of Scale AI, along with other experts in the field, suspect that DeepSeek and similar companies might possess more Nvidia chips than they are legally allowed to reveal due to export regulations.

Last week, the CEO of Scale AI, Alexandr Wang, mentioned that Chinese AI labs, including DeepSeek, possess a greater number of Nvidia chips than they’re comfortable discussing due to the ongoing U.S. export restrictions.

— Morning Brew ☕️ (@MorningBrew) January 27, 2025

It seems that the debut of DeepSeek has encountered some significant challenges for the company. According to their official site, they’ve been dealing with “massive cyber attacks” targeting their services, shortly following its release.

1) Globally, Nvidia ranks as the third largest company when it comes to market capitalization, following closely behind Apple and Microsoft. This week marks the release of their latest product lineup – the GTX 50-series GPUs, available for purchase starting now.

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2025-01-27 22:39