On January 28, 2025, the U.S. stock market experienced a significant downturn, primarily driven by a historic plunge in Nvidia’s stock price. The semiconductor giant’s shares plummeted by 17%, erasing approximately $589 billion in market capitalization—the largest single-day loss in Wall Street’s history.Â
This dramatic decline was triggered by the emergence of DeepSeek, a Chinese artificial intelligence (AI) startup. DeepSeek’s latest AI model has garnered attention for its cost-effectiveness, operating efficiently on less powerful chips compared to those required by established AI models. The model’s rapid ascent to the top of Apple’s App Store rankings underscores its immediate impact and potential threat to U.S. tech dominance.
The ripple effects of DeepSeek’s innovation extended beyond Nvidia. The Nasdaq Composite Index fell by 3.07%, with the Nasdaq 100 dropping 2.97%. Other tech giants, including Microsoft and Alphabet (Google’s parent company), also faced declines, while Apple bucked the trend, seeing a 3.2% increase in its stock value. This surge allowed Apple to reclaim its position as the world’s most valuable publicly traded company, surpassing both Nvidia and Microsoft.
Analysts are now questioning the previously unchallenged valuations of companies like Nvidia. The success of DeepSeek suggests that significant investments in high-end infrastructure may not be the only path to AI advancement. Nirgunan Tiruchelvam of Aletheia Capital noted that DeepSeek’s approach challenges the substantial resources allocated by Silicon Valley to AI development.
As the tech industry grapples with this new paradigm, the focus shifts to how established players will respond to emerging, cost-effective competitors from China. The evolving landscape underscores the dynamic nature of technological innovation and the global race for AI supremacy.
