Nvidia witnessed a significant drop of over 13% in its stock value, leading to a slide in tech stocks premarket, following an unsettling move by China's DeepSeek in the AI domain.
DeepSeek's Challenge to OpenAI
Last week, DeepSeek introduced a new model that posed a direct challenge to the offerings of OpenAI, both in terms of pricing and capabilities. The revelation hinted at DeepSeek rapidly catching up with OpenAI's technology.
Impact on Tech Stocks
The repercussions were felt across AI-related stocks, with giants like SoftBank and ASML experiencing sharp declines in their stock values. Even tech behemoth Microsoft is anticipated to open on a lower note.
Global Tech Market Turmoil
The global tech market witnessed a turmoil on Monday post the unexpected move by Chinese AI startup DeepSeek. Nasdaq 100 futures in the US plummeted by 3.3%, with chip leader Nvidia taking a hit of up to 14% before slightly recovering.
Market Reaction and Financial Losses
Nvidia, which had seen a remarkable surge of nearly 130% in the past year, faced a potential loss of hundreds of billions if the downward trend continued. Microsoft, Palantir, and Alphabet also experienced notable declines in their stock values.
Regional Impact
Asia too felt the ripples, with SoftBank in Japan and other chip companies facing significant drops. The unveiling of DeepSeek's new AI model, R1, which offers advanced reasoning capabilities at a lower cost, raised concerns about the US maintaining its AI supremacy.
Market Analysis and Future Outlook
Experts suggest a potential emergence of competing AI influences from the US and China. While some view the market slide as a buying opportunity, others believe that the rise of DeepSeek could challenge Nvidia's dominance and disrupt the status quo.
US Response and Tech Industry Dynamics
President Trump's push for accelerating AI development and investments reflects the intense competition in the AI landscape. The evolving scenario may force tech giants to rethink their strategies and adapt to the changing market dynamics.
Implications and Opportunities
The rise of DeepSeek and its budget-friendly AI solutions pose questions about the future of high-cost AI investments. While tech companies brace for impact, non-tech businesses could potentially benefit from accessible AI technology at reduced costs.
As the tech industry braces for Big Tech earnings announcements, the spotlight remains on the effectiveness of AI investments and the competitive challenges posed by emerging players like DeepSeek.
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By: pthompson@insider.com (Polly Thompson)
Title: Nvidia Stock Plunges as Chinese AI Startup DeepSeek Challenges OpenAI
Sourced From: markets.businessinsider.com/news/stocks/nvidia-tech-stocks-deepseek-ai-race-nasdaq-2025-1
Published Date: Mon, 27 Jan 2025 12:55:44 +0000
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