Nvidia NVDA saw its market capitalization drop by $589 billion following the release of competitive reasoning models from the Chinese startup DeepSeek.
Nvidia NVDA experienced one of the largest single-day market cap losses in history after the Chinese AI lab DeepSeek released its R1 and V3 reasoning models. The models demonstrated that high-quality AI can be trained on a fraction of the hardware typically required by Western labs. While leading U.S. companies often utilize tens of thousands of cutting-edge chips, DeepSeek trained its V3 model using just over 2,000 Nvidia H800 GPUs. This development has introduced volatility into the semiconductor sector, as investors question whether massive capital expenditures on premium silicon are always necessary. The news contributed to a broader sell-off in chip stocks, with the PHLX Semiconductor Index declining more than 9% over the week. Additionally, the launch of DeepSeek’s models sparked a wave of fraudulent "DeepSeek AI" tokens on the Solana and Ethereum blockchains. Despite these challenges, market analysts remain focused on whether hyperscalers will continue their heavy spending to justify the current AI infrastructure investments.