DeepSeek AI Model Triggers Historic Tech Stock Selloff
Global tech stocks experienced a significant selloff on Monday, January 27, 2025, as the emergence of a low-cost Chinese artificial intelligence (AI) model, DeepSeek, rattled investor confidence in the dominance of U.S. AI leaders like Nvidia. The tech-heavy Nasdaq fell 3.1%, with Nvidia leading the decline, shedding $593 billion in market value—the largest single-day loss in Wall Street history. Other major tech stocks, including Microsoft, Alphabet, and Broadcom, also saw sharp declines.
DeepSeek, a Chinese startup, launched a free AI assistant last week that reportedly uses less data and operates at a fraction of the cost of U.S. rivals like OpenAI’s ChatGPT. The app quickly surged in popularity, topping Apple’s App Store downloads and raising concerns about the future demand for high-cost AI infrastructure, including Nvidia’s advanced chips. DeepSeek’s models, such as DeepSeek-V3 and DeepSeek-R1, were developed using Nvidia’s lower-capability H800 chips, costing less than $6 million—a stark contrast to the billions invested by U.S. firms in AI development.
The selloff extended beyond tech stocks, with energy-related companies like Vistra and Constellation Energy also declining as investors questioned the need for massive power consumption by data centers. Analysts noted that DeepSeek’s cost-efficiency and open-source nature could disrupt the AI narrative that has driven market optimism in recent years. However, some experts, including Nvidia shareholders, called the selloff an overreaction, arguing that the real value in AI lies in data center infrastructure, where Nvidia remains a key player.
President Trump described DeepSeek’s rise as a “wake-up call” for U.S. industries, emphasizing the need for continued innovation to maintain competitiveness. Meanwhile, Silicon Valley figures like Marc Andreessen praised DeepSeek’s breakthroughs, calling its R1 model a “profound gift to the world.” Despite the market turmoil, Nvidia shares rebounded slightly in after-hours trading, signaling potential investor confidence in the long-term demand for AI technology.
DeepSeek sparks AI stock selloff; Nvidia posts record market-cap loss
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