Nvidia Corp. NVDA experienced a significant decline on Monday, breaking below its 200-day moving average after a sharp selloff. This downturn came just after the introduction of DeepSeek, a new open-source AI platform from China, raising concerns about demand for Nvidia’s high-end chips.
Nvidia’s Stock Takes a Hit Amidst AI Revolution
By 3:15 p.m. ET, Nvidia’s stock had fallen 16% to $178 per share, marking its steepest decline since March 18, 2020. This drop represented a major technical reset as the stock had consistently stayed above its 200-day moving average since January 12, 2023.
The U.S.’s largest semiconductor firm also saw over $600 billion wiped off its market capitalization, affecting its standing in U.S. stock market history with the largest single-day loss recorded.
Exchange-traded funds (ETFs) that track Nvidia, including the Direxion Daily NVDA Bull 2X Shares NVDU and GraniteShares 2x Long NVDA Daily ETF NVDL, plummeted by 35% as a result.
DeepSeek’s Emergence Changes the AI Landscape
According to the CFTC-regulated platform Kalshi, the probability of DeepSeek winning the title of “Best AI Model of the Year” jumped from 25% to 46% on Monday. This increase in odds correlates with the platform’s dominance in App Store downloads, indicating strong initial user interest.
David Bahnsen, the chief investment officer at The Bahnsen Group, noted that the current tech selloff is largely driven by worries that DeepSeek may be outpacing ChatGPT in terms of usage, which could impact Nvidia’s sales of advanced chips.
Senior market analyst David Morrison from Trade Nation pointed out that DeepSeek has accomplished this growth “at a fraction of the cost, using less powerful Nvidia chips,” thus avoiding U.S. export restrictions.
In light of Nvidia’s upcoming earnings report next month, Wall Street analysts are contemplating whether the company’s capital spending on AI is growing faster than its revenue. Ed Yardeni, a veteran market strategist, raised concerns about potential revenue disappointments due to soaring AI expenditures that might squeeze profit margins.
DeepSeek’s Rapid Growth Raises Security Concerns
Cybersecurity specialist Adrianus Warmenhoven from NordVPN cautioned that DeepSeek’s swift rise in popularity raises urgent questions about privacy and security, particularly given China’s restrictive regulations.
“The rise of startups like DeepSeek creates both chances and threats for user safety. Caution is essential, especially with varying global data privacy laws,” Warmenhoven stated.
