Nvidia loses $500bn in tech stock value after AI market rout
Nvidia, the poster child of the AI frenzy, sank 17% — wiping out $589bn (€561.5bn) of its value in the biggest market-cap loss for a single stock in market history.
From New York to London and Tokyo, equities got hit. While the slide came after a torrid rally to all-time highs, yesterday’s rout was triggered by a rise of DeepSeek’s latest AI model to the top of the Apple’s app store.
The S&P 500 dropped 1.5% and the Nasdaq 100 sank 3%. A closely watched gauge of chipmakers plunged the most since March 2020.
Nvidia, the poster child of the AI frenzy, sank 17% — wiping out $589bn (€561.5bn) of its value in the biggest market-cap loss for a single stock in market history.
In a rush for safety, defensive industries such as consumer staples and healthcare were bid. Treasuries rallied, driving yields to the lowest levels this year. Haven currencies, including the yen and the Swiss franc, climbed.
Monday's plunge drove new fissures into a market narrative that prevailed since the re-election of Donald Trump in November, the America-first, tech-fuelled uber-bullishness that saw a clear upward path for risky assets spurred by deregulation, tax cuts, and even government sponsorship of AI investment.
Treasury yields slid sharply as haven-seeking investors laid aside concern — for Tuesday, anyway — that the new president’s policies will stoke inflation.
DeepSeek’s success at building an advanced AI model without access to the most cutting-edge US technology has raised concerns about the efficacy of Washington’s attempts to stymie China’s hi-tech sector.
DeepSeek claims to have used fewer chips than its rivals to develop its models, making them cheaper to produce and raising questions over a multibillion-dollar AI spending spree by US companies that has boosted markets in recent years.
The company was founded by entrepreneur Liang Wenfeng, who runs the High-Flyer Capital hedge fund that uses AI to identify patterns in stock prices. Mr Liang reportedly started buying Nvidia chips in 2021 to develop AI models as a hobby, bankrolled by his hedge fund. In 2023, he founded DeepSeek, based in the eastern Chinese city of Hangzhou.
Marc Andreessen, a leading US venture capitalist, compared the launch of DeepSeek’s R1 model last Monday to a pivotal moment in the US-USSR space race, posting on X that it was AI’s ‘Sputnik moment’, when the Soviet Union astounded its Cold War rival by launching a satellite into orbit.
The severity of the sell-off in US assets was proportionate to the weightings of AI-enabled firms in the biggest stock indexes. Even after a recent paring to curb their influence, the cohort of Nvidia, Apple, Microsoft, Amazon, Meta, and Alphabet account for about 40% of the Nasdaq 100. It’s roughly 30% in the S&P 500, leaving both gauges significantly exposed to concerted drops in those names.
“The sudden, adverse market reaction to DeepSeek indicates that some of the key assumptions that have been driving the AI trade, and hence major indices, are getting reassessed today,” said Steve Sosnick at Interactive Brokers. “I believe that part of today’s sudden adverse market reaction was a direct result of a wave of complacency that overtook the equity market.”
Cryptocurrency-linked stocks also sank on Monday as investors questioned the hundreds of billions in planned spending on the technology, including the money that AI firms were looking at spending on the computing power controlled by crypto miners.
Bitcoin fell about 5% to trade just under $100,000 on Monday afternoon in New York. Ether dropped about 7% and Solana dropped roughly 9%. Crypto-mining firm Core Scientific fell around 30%, while fellow mining companies such as Hut 8, Riot Platforms, and Cipher Mining also saw their stocks plunge.
Shares on the Irish Stock Exchange were not impacted, with the Iseq All Share Index up 0.67% on Monday.
- Bloomberg and Guardian
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