Nvidia Shares Plunge Amidst AI Market Turmoil

On Monday, shares of Nvidia, a leading player in the artificial intelligence (AI) sector, experienced a significant decline, falling by 17 percent. This drop erased a staggering $593 billion from the company's market value, marking the largest one-day loss for any company in history.

The decline in Nvidia's shares was part of a broader selloff in technology stocks, triggered by the recent launch of a low-cost AI model by the Chinese startup DeepSeek. This model has gained considerable attention for its ability to operate with less data and at a much lower cost than existing services. OpenAI CEO Sam Altman acknowledged the model's capabilities, describing it as "impressive" in a social media post.

The introduction of DeepSeek's AI assistant has raised concerns among investors about the high valuations and competitive landscape of major AI companies. As a result, many investors moved to sell off tech stocks globally, affecting markets from Tokyo to Amsterdam and Silicon Valley.

In Japan, companies closely tied to Nvidia, such as Advantest, saw sharp declines, with shares dropping 10 percent on Tuesday after an almost 9 percent fall on Monday. Similarly, Tokyo Electron, another chip-making company, fell by 5.3 percent, while investor SoftBank Group decreased by 6 percent.

In the United States, the impact of the tech selloff was felt across several companies. Broadcom's shares fell 17.4 percent, Microsoft dropped 2.1 percent, and Alphabet, the parent company of Google, saw a decline of 4.2 percent. The Philadelphia semiconductor index suffered a substantial 9.2 percent drop, marking its most significant percentage reduction since March 2020.

The unfolding selloff has highlighted the risks associated with concentrated investments in high-valuation tech stocks, raising questions about the sustainability of the surge in AI hype that has driven stock prices to record levels over the past 18 months. David Bahnsen, chief investment officer at The Bahnsen Group, remarked that the valuations of many of these companies leave little room for error.

Additionally, companies focused on data centers have not been spared from the downturn. Malaysia's YTL Power, for instance, experienced a loss of 7.5 percent on Tuesday, continuing a trend of significant losses.

Market strategist Jun Rong Yeap commented that investor sentiment has turned cautious, leading to a "sell first, think later" mentality in response to uncertainties surrounding DeepSeek and its potential to reshape the AI landscape in the U.S.

DeepSeek, based in Hangzhou and controlled by Liang Wenfeng, a well-known figure in quantitative hedge funds, has introduced an AI model using Nvidia's less advanced H800 chips for training at a fraction of typical costs.

Charu Chanana, chief investment strategist at Saxo, pointed out that the emergence of DeepSeek serves as a reminder that competition in the AI space is intensifying, indicating that Nvidia's leadership position might not be guaranteed in the long term.

Investors are now bracing for a week filled with tech earnings reports, during which company executives are expected to address investor concerns and provide guidance moving forward.

Nvidia, AI, Market