Nvidia shares plunge 17 percent, hitting the lowest U.S. share level in DeepSeek

Nvidia shares plunge 17 percent, hitting the lowest U.S. share level in DeepSeek

29/01/2025

Nvidia shares fell 17 per cent on January 27, causing its market value to drop by US$589 billion (RM2.58 billion) and considered one of the biggest losses in US stock market history. - Daily Ray Photo


YORK: Investors' concerns over the impact of Chinese artificial intelligence (AI) startup DeepSeek have caused the stock value of major US technology company Nvidia to plummet to a record low.

Nvidia shares fell 17 per cent on January 27, causing its market value to drop by US$589 billion (RM2.58 billion) and considered one of the biggest losses in US stock market history.

The total loss exceeded the record set in September 2024, where Nvidia shares fell 9 per cent, causing its market value to decrease by around US$279 billion (RM1.225 billion). The fall in Nvidia shares also had a major impact on other markets as the company influenced major indices.

According to Bloomberg, the fall in Nvidia shares has contributed to eight of the 10 biggest one-day declines for the S&P 500 Index by market value.

On Jan. 27, the S&P 500 fell 1.5 percent while the Nasdaq 100 plunged nearly 3 percent.

DeepSeek is also driving a broad sell-off in tech stocks, as it is seen to be able to offer technology comparable to large US companies – which are said to have invested too much in AI development – at a much lower price.

DeepSeek's latest AI model, which was launched recently, is considered capable of competing with OpenAI's ChatGPT model and Meta Platforms' Facebook, Bloomberg reported.

The open-source product, which currently tops the Apple App Store download list, was founded by hedge fund manager Liang Wenfeng.

"Concerns have arisen about the possibility that the application could disrupt the current AI business model, which relies on high-performance chips as well as huge computing power and energy," investment bank analyst Jefferies told their clients.

Nvidia is the biggest beneficiary of the company's increased spending on AI development as the giant designs semiconductor chips used in the technology.

While companies are expected to continue to make significant expenditures in AI development, investors may think twice about continuing to support companies that do not demonstrate sufficient return on investment (ROI).

On January 24, Meta announced plans to increase capital expenditure for AI projects by 2025 to US$65 billion (RM258.49 billion), further boosting its shares to record highs.

The announcement follows the move by OpenAI, SoftBank Group and Oracle to launch a US$100 billion (RM439.23 billion) joint venture called Stargate, to build data centres and AI infrastructure projects across the US.

In an effort to block China's progress in the field of AI, the United States has banned the export of advanced semiconductor technology to the country and limited the sale of advanced Nvidia AI chips to other parties.

Still, DeepSeek's progress shows that Chinese AI engineers have found a way to overcome the restriction, focusing on higher efficiency using limited resources.

Nvidia said in a statement that the DeepSeek model is a 'brilliant AI advancement' and proof the company is capable of developing the technology without violating US sanctions against it.