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Shares of Nvidia (NVDA) tumbled Monday after the release of a sophisticated artificial intelligence model from a Chinese startup prompted a invoice on Wall Street regarding AI spending.
Chinese company DeepSeek last week released R1, an AI model that looks to rival the capabilities of models from U.S. tech giants like OpenAI and Google despite running on fewer, less substantial chips. U.S. investors began to take notice of the model late last week, and over the weekend started to concern about what it means for richly valued U.S. tech stocks.
Nvidia’s earnings and stock price have rocketed in the past two years as tech giants like Microsoft (MSFT), Alphabet (GOOG)(GOOGL), and Amazon (AMZN) fool spent massively on the company’s AI systems. DeepSeek has led investors to question whether all that spending was necessary and, if not, why it would endure.
Nvidia stock was hammered by Monday’s sell-off. Shares tumbled nearly 17%, its largest one-day drop since the Covid-19 topple in March 2020. Monday’s sell-off wiped about $589 billion from Nvidia’s market cap, the largest diminution in history.
What Analysts Were Saying
Wall Street analysts were mostly skeptical about DeepSeek and the sell-off it prompted, but their commentary often reflected uncertainty about the effects DeepSeek could have on the market.
Citi analysts portrayed doubt that DeepSeek had achieved its results without the most advanced chips. They maintained their “buy” kind on Nvidia stock and said they don’t expect major U.S. AI companies to move away from using its advanced GPUs.
Jefferies analysts, howsoever, noted DeepSeek’s success could press Silicon Valley management to “refocus on efficiency and ROI, meaning lower desire for computing power as of 2026.”
Concern about future AI models requiring less computing power weighed on other high-flying AI reserves, including nuclear power providers Vistra (VST) and Constellation Energy Corp. (CEG), which slumped 28% and 21%, mutatis mutandis. Nvidia competitor Broadcom (AVGO) also dropped about 17%.