DeepSeek's claim to have developed a powerful AI model using less powerful chips than major US companies sparked a sell-off in the tech sector on Monday. Nvidia, a leading AI chipmaker, suffered the largest single-day decline in US history, wiping out nearly $600 billion in market capitalization. Other AI-related stocks also tumbled, leading to a 3.07% drop in the Nasdaq Composite and a 1.46% decline in the S&P 500. While the Dow Jones Industrial Average managed to advance 0.65%, the overall market sentiment reflected a growing unease over the sustainability of AI investments.
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The global tech sector experienced a significant downturn on Monday, driven by concerns surrounding the energy consumption of artificial intelligence (AI) applications. DeepSeek, a newly emerged AI firm, made waves with its claim that it developed a powerful AI model using less sophisticated chips compared to those utilized by major U.S. AI companies like OpenAI and Nvidia. DeepSeek's assertion sparked fears that the substantial investments made by U.S. firms in AI might be unjustified and potentially a bubble waiting to burst.This fear reverberated through the market, particularly in semiconductor and AI-related stocks, leading to a widespread sell-off. Nvidia, a leading player in the AI chip market, suffered the most substantial single-day decline in U.S. history. Its market capitalization plummeted by nearly $600 billion, pushing it from the top spot to third place, behind Apple and Microsoft. This significant drop in market value exceeded the entire market capitalization of companies like and . The tech-heavy Nasdaq Composite plunged 3.07%, and the S&P 500 followed suit with a 1.46% decline. However, the Dow Jones Industrial Average managed to buck the trend, inching up 0.65%, bolstered by gains in Apple, Johnson & Johnson, and Travelers.Even though the overall market sentiment leaned towards pessimism, some analysts saw an opportunity in the AI cost reduction narrative. Stocks related to cloud computing, such as Amazon and Google Cloud, witnessed an increase as investors anticipated potential margin expansions if DeepSeek's claims about lower AI development costs prove accurate. The market volatility highlighted the intense scrutiny and uncertainty surrounding the AI sector, with investors grappling to assess its long-term implications. CNBC's Lisa Kailai Han, Fred Imbert, Pia Singh, Jesse Pound, Michelle Fox, Nicholas Wells, Adrian van Hauwermeiren, and Scott Schnipper contributed to this report.
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