Nasdaq experienced its largest single-day percentage drop since Dec. 18 on Monday as a low-cost Chinese AI model triggered a sharp sell-off in U.S. chipmakers.
The renowned AI company Nvidia saw its stock plummet by 17%, resulting in a staggering $593 billion loss in market value, marking the biggest one-day loss ever recorded on Wall Street. This loss surpassed Nvidia’s previous record set in September. The semiconductor stocks index also tumbled by 9.2%, marking its most significant one-day decline since March 2020.
The catalyst behind this market turmoil was the emergence of a Chinese startup called DeepSeek, which introduced a cost-effective AI assistant that utilises more affordable chips and less data. This development raised concerns among investors about the anticipated demand for AI technology and its impact on the supply chain, stretching from chip manufacturers to data centers.
DeepSeek’s AI Assistant quickly gained traction, surpassing its U.S. competitor ChatGPT in downloads from Apple’s App Store.
Kim Forrest, the Chief Investment Officer at Bokeh Capital Partners in Pittsburgh, expressed uncertainties about the DeepSeek model and its implications. Despite the drastic decline in AI leader stocks, Forrest believes that their true value is yet to be determined beyond the short-term market reactions.
On Wall Street, the Dow Jones Industrial Average rose by 289.33 points, the S&P 500 fell by 88.96 points, and the Nasdaq Composite dropped by 612.47 points. This marked the largest single-day percentage decline for the S&P 500 since Jan. 10. The Cboe Volatility Index, also known as the “fear gauge,” saw an increase.
Major tech-related companies experienced substantial losses, with Microsoft and Google-parent Alphabet declining by 2.1% and 4.2%, respectively, while AI server maker Dell Technologies saw an 8.7% drop. Data center operators like Digital Realty also faced significant declines, with an 8.7% decrease in their stock value.
Power companies, expected to benefit from the demand generated by energy-intensive data centers for AI technology development, also witnessed a slump. Vistra, for instance, saw a notable 28.3% decline in its stock.
This week is expected to remain volatile for tech stocks, as Microsoft and other significant technology firms are set to report their quarterly results. Additionally, investors are eagerly awaiting the Federal Reserve’s interest rate decision scheduled for Wednesday.
The market also reacted to the news that the U.S. and Colombia de-escalated trade tensions on Sunday after Colombia agreed to accept military aircraft carrying deported migrants. The trading volume on U.S. exchanges was 17.39 billion shares.
Overall, the stock market landscape remains uncertain, with advancing issues slightly outnumbering decliners on the NYSE, while the Nasdaq reported more declining issues than advancers. Market watchers are closely monitoring these developments and awaiting further insights in the coming days.
