Nvidia recorded a significant fall in price. The reason for the drop in price is due to investors being worried about competition from China’s artificial-intelligence start-up known as DeepSeek. It resulted in loss of a big amount of market value in the market leading to the largest loss for any firm in the world.

Downfall of Nvidia
When the market started on 27th January, 2025, the Nvidia recorded a fall of close to 13 percent. It resulted in the company losing market capitalization of around $465 billion. The fall overshadowed its previous fall in the month of September which accounts to about 9 percent and loss of $279 billion of market capitalization.

Spill-over Effect
Nvidia has a considerable position in important indexes. It led to a spillover effect in these indexes and market as well. In the past, the company’s stock decline has resulted in seven of the ten highest falls in the S&P index. Currently, the drop in Nvidia’s stock led to a fall of about 3.6 percent and 2.3 percent in Nasdaq 100 and S&P 500 indexes, respectively.

Reason for market downturn in technology stocks
The large drop in Nvidia’s stock led to a huge sell of a number of technology stocks in the markets. The main reason for this is rising concerns among investors about DeepSeek and its low cost AI model. Many investors are anxious that the large firms in the US have spent a large amount of funds in the creation of artificial intelligence. In contrast to this, the Chinese company was able to create AI models which are competitive to western AI models at a very low cost.

Concerns about DeepSeek
In the previous week, China launched its AI model known as DeepSeek. It is observed as an AI model which competes with AI models such as Meta Platforms Inc. and Open AI. It was created by Liang Wenfeng, chief of quantfund. The product is in the top list of the Apple’s app store.

According to the analysts of Jefferies, this could be a big matter of concern for the prevailing AI models in the market. The reason for this is that these models are working with huge computing power, high levels of use of energy, and also use of expensive chips.

Expenditure on AI models
For years, huge expenditure has been made on AI models. This has helped Nvidia to gain benefits as it makes semiconductors for AI technology. Such a big amount of expenditure will remain in the future as well. However, the investors will be vigilant about firms which make huge investments in AI models but with no returns.

Meta made a public statement that it will increase its capital financing on AI technology plans to about 50 percent leading to the value of 65 billion dollars. This resulted in prices of Meta stock reaching high. Apart from this, Stargate, a joint venture was launched by companies such as SoftBank Group, Oracle, and OpenAI of about 100 billion dollars. The purpose of the plan is to create AI infrastructure and data centers across the United States.

Deepseek’s progress in midst of US bans
The US has taken certain steps to halt the development of China in AI models such as prohibition of export of advanced semiconductors. It also restricted the amount of sales of advanced AI chips of Nvidia to many countries in the world. Due to export prohibition by the USA, the Dutch company known as ASML was not at any point of time able to export its high-tech extreme ultraviolet lithography machines to China. Even under Biden’s regime, the Dutch was not able to export its immersion deep ultraviolet lithography machines to China.

Despite these challenges, the development of DeepSeek indicates that China has been able to pave its way in AI models by focusing on using its scarce resources in the wellplanned way.