DeepSeek Sparks Market Rethink of the AI Fueled Rally – NVDA Posts Record 1-Day Loss
DeepSeeks performance as a generative AI model has raised questions over assumptions of AI driven price action.
- DeepSeek popularity surges, beats ChatGPT
- NVDA loses $593 billion in market cap
- Opportunity to exit or enter?
European markets managed to maintain their ground today after yesterday’s selloff in AI tech stocks. The FTSE gained 0.21% and the DAX gained 0.10% at one point this morning.
DeepSeek Questions AI Rally
Global stock investors lost confidence in the AI tech rally after the low-cost and low power Chinese AI model’s performance emerged.
On Monday the Chinese startup’s free app powered past ChatGPT for downloads on the App store.
The new AI app showed that the same performance of the ChatGPT model could be achieved at a fraction of the cost in terms of data and power.
The news sparked a market rout in tech stocks, leading the NAS100 to close down 3.1% after being down nearly 4% during the day.
NVDA Live Chart
Wall Street’s Record 1-Day Loss from NVDA
Yesterday’s session saw NVDA/USD lose $593 in market capitalization. The drop is equal to a decline in stock price of 16.97% from the previous day’s close.
The performance is Wall Street’s largest 1-day loss in market capitalization for any company. Other stocks were also hit hard, Broadcom Inc., Nasdaq’s second largest chip maker, lost 17.4% on the day.
Yesterday’s loss in market cap was more than double the previous 1-day loss for any stock on Wall Street.
Opportunity or Start of a Demise
Some analysts are marking this moment as a revelation that the AI rally has been overvalued. With many projections of growth based on overestimates of the number, power and infrastructure needed.
The AI model from DeepSeek shows that less powerful and smaller numbers of chips are needed. Also raising the notion that there will be less need for infrastructure from data centers.
On the other hand, some analysts have the view that the sharp drop in tech stocks may be a moment to enter the AI sector at a discount.
This assumption may be food for thought, as NVDA has lost over 20% in stock price in just 2 days.
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