US stock markets experienced a sharp decline on Monday, with chipmaker Nvidia losing nearly $600 billion in market value, following a groundbreaking announcement from the Chinese artificial intelligence startup DeepSeek. This development has shaken confidence in the dominance of American tech companies.
DeepSeek, a one-year-old startup, unveiled its ChatGPT-like AI model, R1, which boasts similar capabilities to models from OpenAI, Google, and Meta but operates at a fraction of their costs. The company disclosed it spent only $5.6 million on computing power for its base model, a stark contrast to the billions US companies invest in their AI technologies.
The announcement caused turmoil in the tech sector, with the Nasdaq falling 3.1% and the S&P 500 dropping 1.5%. Nvidia, a leader in AI chip production, saw its stock plummet by 17%, erasing $588.8 billion in market value—the largest single-day loss for any stock in history. Nvidia’s decline pushed it from the top spot among publicly traded companies to third, behind Apple and Microsoft.
Meta, Alphabet, and other tech giants also faced significant losses, while competitors like Marvell, Broadcom, and Micron saw their stocks fall sharply. Analysts believe DeepSeek’s breakthrough has raised questions about whether the massive spending by US tech companies on AI will result in sustainable profits.
Despite years of US efforts to restrict advanced AI chip supplies to China, DeepSeek achieved its low-cost model using less powerful chips, making its accomplishment even more remarkable. This has prompted investors to take a closer look at Chinese AI companies, which have been trading at discounts due to geopolitical concerns.
Energy companies, heavily reliant on AI data center demand, also faced steep declines. Constellation Energy, which had planned to power AI through the revival of the Three Mile Island nuclear plant, saw its stock fall by 21%, while other energy providers like Vistra and GE Vernova experienced similar losses.
The news marks a significant shift in global AI competition, potentially driving renewed interest in Chinese tech companies. As DeepSeek’s rise challenges US dominance in the AI sector, markets brace for further volatility in the coming weeks.
