Nvidia: DeepSeek's AI Model an 'Illustration' of Export-Control Compliance Amid Market Value Plunge
Monday, Jan 27, 2025 9:21 pm ET
5min read Nvidia, the world's leading AI chipmaker, has faced a significant market value plunge, losing nearly $600 billion in a single day. Amidst this turmoil, the company has drawn attention for its response to DeepSeek, a Chinese AI lab that recently unveiled a free, open-source large language model. Nvidia has interpreted DeepSeek's model as an 'illustration' of how new AI models can be created while being export-control compliant.
Nvidia's CEO, Jensen Huang, has personally lost $10 billion in wealth due to the company's market value decline. The chipmaker has been in a rut since June 18, when it topped $3.3 trillion in value, the highest for any public company. As the US economy shows signs of stress, investors have grown skeptical of Nvidia and other AI stocks' sky-high valuations.
The company's recent earnings report disappointed investors, with its outlook failing to meet expectations. Nvidia's stock fell 9.5% on Tuesday, shaving a stunning $279 billion off the company's value. This decline outpaced the previous record of $240 billion set by Meta in 2022. Only 27 companies on the planet are worth as much as Nvidia lost in value on Tuesday.
Nvidia's market value drop is worth more than all the shares of some of America's biggest companies, including McDonald's, Chevron, and Pepsi. The company's decline has raised concerns about its grip on the broader index, with some analysts warning that a large enough sell-off could spark a broader market slump.
Nvidia has been the subject of an antitrust probe by the US Justice Department, which has reportedly sent it a subpoena as part of the investigation. The company stated last week that it had not received a subpoena, after a media report suggested otherwise. The Department of Justice declined to comment directly on a potential antitrust investigation.
Nvidia's response to DeepSeek's AI model release has been to emphasize the demand for its chips and the returns that clients are seeing from investing in Nvidia infrastructure. Wedbush's Dan Ives believes Nvidia's stock decline presents a buying opportunity, stating that Nvidia has changed the tech and global landscape as its GPUs have become the new oil and gold in the IT landscape.
Nvidia's market value plunge has affected other industries, such as data center companies and other chipmakers. U.S. chipmaker Broadcom saw its stock drop 17% on Monday, pulling its market cap down by $200 billion. Data center companies reliant on Nvidia's GPUs, like Dell, Hewlett Packard Enterprise, and Super Micro Computer, experienced stock declines of at least 5.8%. Oracle, a part of President Donald Trump's latest AI initiative, saw a 14% stock decrease.
Nvidia's loss was more than double the $279 billion drop the company saw in September, which was the biggest one-day market value loss in history at the time, unseating Meta's $232 billion loss in 2022. Before that, the steepest drop was $182 billion by Apple in 2020.
Nvidia's decline is more than double the market cap of Coca-Cola and Chevron and exceeds the market value of both Oracle and Netflix. CEO Jensen Huang's net worth also took a massive hit, declining roughly $21 billion, according to Forbes' real-time billionaires list. The move demoted Huang to 17th on the richest-person list.
The sudden excitement around DeepSeek over the weekend pushed its app past OpenAI's ChatGPT as the most-downloaded free app in the U.S. on Apple's app store. The model's development comes despite a slew of recent curbs on U.S. chip exports to China.
Venture capitalist David Sacks, who was tapped by Trump to be the White House's AI and crypto czar, wrote on X that DeepSeek's model "shows that the AI race will be very competitive" and that Trump was right to rescind President Joe Biden's executive order last week on AI safety.
Nvidia is now the third most valuable public company, behind Apple and Microsoft. The company's response to DeepSeek's AI model release has been to emphasize the demand for its chips and the returns that clients are seeing from investing in Nvidia infrastructure. Wedbush's Dan Ives believes Nvidia's stock decline presents a buying opportunity, stating that Nvidia has changed the tech and global landscape as its GPUs have become the new oil and gold in the IT landscape.
In conclusion, Nvidia's response to DeepSeek's AI model release has been to emphasize the demand for its chips and the returns that clients are seeing from investing in Nvidia infrastructure. The company's market value plunge has affected other industries, such as data center companies and other chipmakers. Nvidia's interpretation of DeepSeek's model aligns with the current export control regulations, but the implications for the company's future compliance remain to be seen. The market's reaction to Nvidia's response will likely influence investor sentiment and the company's ability to maintain its dominance in the AI chip market.
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