$938b meltdown: Wall Street darling suffers biggest one-day loss in history

Shares in artificial intelligence powerhouse Nvidia plunged on Wall Street on Monday due to concerns about Chinese artificial-intelligence startup DeepSeek.

Nvidia shares tumbled 17 per cent, the biggest drop since March 2020, erasing around $US590 billion ($938 billion) from the company’s market capitalisation. It is the biggest one-day loss by a company in US sharemarket history.

Nvidia has been the biggest beneficiary of the influx in spending on AI because they design semiconductors used in the technology.Credit: Bloomberg

The latest AI model of DeepSeek, released last week, is widely seen as competitive with those of OpenAI and Meta. The open-sourced product was founded by quant-fund chief Liang Wenfeng and is now at the top of Apple’s App Store rankings.

The semiconductor maker led a broader selloff in technology stocks after DeepSeek’s low-cost approach reignited concerns that big US companies have poured too much money into developing artificial intelligence. The Chinese firm appears to provide a comparable performance at a fraction of the price.

The share price tumble resulted in Nvidia chief executive Jensen Huang’s net worth shrinking by about $US20 billion. He still has a net worth of more than $US100 billion.

Other tech titans whose fortunes are linked to artificial intelligence suffered heavy losses. Oracle co-founder Larry Ellison lost $US22.6 billion while Dell’s Michael Dell lost $US13 billion, and Binance co-founder Changpeng “CZ” Zhao shaved $US12.1 billion.

The drop rippled through the rest of the market due to how much weight Nvidia has in major indexes. Including Monday’s slump, Nvidia selloffs have caused eight of the top ten biggest one-day drops in the S&P 500 Index, based on market value, according to data compiled by Bloomberg. The S&P 500 fell 1.5 per cent on Monday in New York and the Nasdaq 100 tumbled nearly 3 per cent.

“Concerns have immediately emerged that it could be a disruptor to the current AI business model, which relies on high end chips and extensive computing power and hence energy,” Jefferies analysts said in a note to clients.

Nvidia has been the biggest beneficiary of the influx in spending on AI because they design semiconductors used in the technology. While that heavy spending looks poised to continue, investors may grow wary of rewarding companies that aren’t showing a sufficient return on the investment.

Meta announced plans on Friday to boost capital expenditures on AI projects this year by about half to as much as $US65 billion, sending its shares to a record high. That came on the heels of OpenAI, SoftBank and Oracle announcing a $US100 billion joint venture called Stargate to build data centres and AI infrastructure projects around the US.

DeepSeek’s low-cost approach reignited concerns that big US companies have poured too much money into developing artificial intelligence.Credit: Bloomberg

In a bid to stall China’s progress in AI, the US has banned the export of advanced semiconductor technologies to the country and is limiting sales of advanced Nvidia AI chips to others. But DeepSeek’s progress suggests Chinese AI engineers have found a way to work around the export bans, focusing on greater efficiency with limited resources.

Nvidia said in a statement on Monday that DeepSeek’s model is an “excellent AI advancement” and indicated that the Chinese company didn’t violate US restrictions that limit access to advanced US chips in creating its technology. It also added that inference, or the work of running AI models, requires “significant numbers of Nvidia GPUs and high-performance networking.”

Bloomberg

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