The launch of DeepSeek caused the worst fall in Nvidia's history: -$589 billion in market value

The launch of Chinese artificial intelligence DeepSeek shook Wall Street. The hardest hit company was Nvidia, which plummeted 17%, losing $589 billion in market value in the process. It was the worst destruction of value in the history of the stock market, in this case suffered by the Californian chip company, which in 2024 was at times the most valuable in the world.

Chips made by the company have been being used to power leading artificial intelligence models in the United States, such as OpenIA's ChatGPT. However, DeepSeek's breakthrough worried investors about the competitiveness of U.S. artificial intelligence models.

Specifically, this fear lies in the impact of DeepSeek's emergence on the demand for high-end microchips.

"If model training costs prove to be significantly lower, we would expect a near-term cost benefit for advertising, travel, and other consumer app companies that use cloud AI services, while long-term hyperscaler AI-related revenues and costs would likely be lower," Justin Post, an analyst at BofA Securities, wrote about it in an article.

Nvidia's fall also dragged down the S&P 500 and the Nasdaq, two of the world's most important stock indexes. The former fell 1.5%, while the latter fell 3.1%.

As for the impact of DeepSeek, the Chinese artificial intelligence was already crowned as the most downloaded app in AppStore, even ahead of ChatGPT.

Nvidia's response

A company spokesperson spoke with CNBC and highlighted the work of the Chinese AI. "DeepSeek’s work illustrates how new models can be created using that technique, leveraging widely-available models and compute that is fully export control compliant," he said.

"Inference requires significant numbers of NVIDIA GPUs and high-performance networking. We now have three scaling laws: pre-training and post-training, which continue, and new test-time scaling," he added.

The GPU (graphics processing unit) is an electronic circuit that is responsible for processing graphics and video, among other things, widely used in artificial intelligence, video editing and 3D processing.

Nvidia was crowned the world's most valuable company in 2024, dethroning Microsoft on June 18. Despite starting out as a 3D gaming chip company, over the years it expanded into cryptocurrency mining and cloud gaming subscriptions, later catering to artificial intelligence models.