Chinese AI startup DeepSeek erases $600 bn of Nvidia on US stock market

DeepSeek, a Chinese artificial intelligence (AI) model triggered a steep selloff in US semiconductor companies, bringing the markets slumping. 

DeepSeek’s free AI assistant was launched last week, and it claims to use less data and is said to be 95% cheaper than OpenAI rivals like ChatGPT and Gemini, as per reports.

The reports also suggested that it had surpassed ChatGPT in App Store downloads.

As a result, on January 27, the Nasdaq went down by 3.1% thanks to Nvidia’s 17% slump, noted the reports. Not only Nvidia, but chip maker Broadcom also went down by 17.4%, Microsoft that backs ChatGPT went down by 2.1%, and Alphabet – the parent company of Gemini’s Google – went down by 4.2%.

Nvidia’s 17% drop cost investors a whopping $593 billion washout, stated the reports.

Why Nvidia?

Nvidia’s GPUs lead the US market for data centre chips, with major tech companies investing billions in these processors to train their AI models.

DeepSeek claims to use Nvidia’s own lower-capability chips, and thus, is very cost-effective. Moreover, the AI model is open source, unlike OpenAI’s ChatGPT and other rivals.

As per reports, the Hangzhou-based startup claims to be 20-50 times cheaper than its rivals depending on the task.

This, combined with the high costs of AI endeavours in the US that use Nvidia’s high-end chips compared to this low-cost, open-source Chinese alternative, meant bad news for the chip giant as investors started selling their tech stocks on January 27.

India and world markets

The domestic benchmark indices opened higher on Tuesday after ending over a seven-month low in the previous trading session. 

As of 9.33 am, the Sensex was 303 points or 0.41% higher at 75,694, while the Nifty 50 went up 70 points or 0.30% at 22,898.

HDFC Bank, ICICI Bank, Infosys, Axis Bank and State Bank of India gained on the NSE Nifty 50 index in early trade. Nifty Bank was up over 1%.

On Monday, the Indian markets witnessed sharp selling throughout the trading session, following a gap-down opening.

The foreign institutional investors (FIIs) sold equities worth ₹5,015 crore on January 27 and on the other hand, domestic institutional investors bought equities worth ₹6,642 crore on the same day.

In Asia, Japanese shares led losses in equities following a bruising session on Wall Street as a Chinese artificial intelligence (AI) model by DeepSeek startup triggered a steep selloff in US semiconductor companies.

(with inputs from syndicated feed)