Nvidia's Market Cap Plunges $600B Amid DeepSeek's AI Breakthrough

Nvidia Corporation (NASDAQ: NVDA) shares plummeted on Monday, wiping out nearly $600 billion in market capitalization, as investors grappled with the implications of a Chinese AI startup's latest breakthrough. DeepSeek, a private company founded in July 2023, released its R1 model on Friday, which has sparked concerns about the demand for Nvidia's high-end chips and the future of AI development costs.



DeepSeek's R1 model, developed in just two months at a cost of under $6 million, has raised eyebrows in the AI industry. The model, which relies on inference-time computing and open-source technology, has been praised for its performance and efficiency. Wedbush Securities analyst Dan Ives pegged the development costs at only $6 million, a fraction of the estimated $1 trillion that major U.S. companies are expected to invest in AI over the coming years.

The release of DeepSeek's latest app has roiled shares of AI stalwarts such as Nvidia, the high-flying manufacturer of advanced chips engineered for AI development. Nvidia stock tumbled 17% on Monday, pulling down other AI stocks and tech-heavy indices. The sell-off comes amid concerns that DeepSeek's technology could reduce demand for Nvidia's high-end chips and put pressure on tech stocks that have been buoyed by the promise of AI.



While DeepSeek's achievement is impressive, some experts remain skeptical about its long-term impact on the AI chip market. Giuseppe Sette, president at AI market research firm Reflexivity, noted that DeepSeek's success shows that AI development doesn't necessarily require vast amounts of resources or expensive hardware. However, he cautioned that the market is still in its early stages, and the ultimate impact of DeepSeek's breakthrough remains uncertain.

In conclusion, DeepSeek's AI breakthrough has sent shockwaves through the tech industry, sparking concerns about the demand for Nvidia's high-end chips and the future of AI development costs. While the long-term impact of DeepSeek's success remains uncertain, the company's achievement has raised important questions about the efficiency and cost-effectiveness of AI development. As the AI market continues to evolve, investors and industry players will be closely watching the competitive landscape and the strategic responses of established players like Nvidia, Google, and Meta.