Nvidia (NVDA) saw its stock drop more than 13% on Monday, wiping nearly $480 billion from its market cap. This sharp decline came after the announcement of a new AI model from Chinese company DeepSeek, which released R1 last week. Despite running on fewer and less powerful chips, DeepSeek’s R1 model appears to rival the capabilities of U.S.-based models from companies like OpenAI and Google.
U.S. investors began to take notice of the potential disruption R1 could bring late last week, with concerns mounting over what this could mean for the future of U.S. tech stocks, which are heavily valued on the back of AI growth. The news sparked worries that future AI models could require less computing power, which could undercut demand for high-performance chips from companies like Nvidia.
The sell-off in Nvidia also affected other AI-related stocks. Energy providers that benefit from AI-driven data centers, like Vistra (VST) and Constellation Energy Corp. (CEG), saw declines of 20% and 18%, respectively. Nvidia competitor Broadcom (AVGO) also slumped more than 12%. As concerns grow about potential competition from Chinese AI models, the broader tech sector is facing increased uncertainty about its future trajectory.
