DeepSea’s Disruption in China Shakes the Tech World, Top Giants Fall Like House of Cards

The escalating competition in artificial intelligence (AI) has recently taken a dramatic turn, with China introducing its formidable AI model, DeepSeek. This technological development has sent shockwaves through the global tech landscape, particularly impacting the U.S. market. With major economies racing to advance their AI capabilities, the stakes have never been higher. Recently, former President Donald Trump announced a massive $500 billion AI undertaking named StarGate aimed at countering China’s advancements. Yet, before the U.S. could solidify its position, China’s strategic maneuver with DeepSeek played a significant role in collapsing the stock prices of several American tech giants, leading to staggering losses in the market.

Impact on NVIDIA: The Most Significant Loss

NVIDIA, a major player in the AI and chip manufacturing sector, faced unprecedented challenges following the announcement of DeepSeek. The company’s stock plummeted by 17%, resulting in a staggering market capitalization loss of approximately $590 billion. Never before in U.S. stock market history has a single company experienced such a significant decline. Once a darling of the stock market, NVIDIA now navigates uncertainties amid mounting competition from China’s advanced AI technologies.

Other Tech Players Feeling the Heat

The implications of DeepSeek’s success did not just end with NVIDIA. Other semiconductor and AI-focused companies also suffered. The stock of Broadcom dropped by 17%, while Super Micro Computer’s shares fell by 13%. Concerns regarding the stability of investments in AI infrastructure led Oracle to close down 14% lower. Alphabet, the parent company of Google, also saw a 4% decrease in its stock price, while Microsoft shares dipped by more than 2%. Tesla, led by Elon Musk, recorded a decline of 2.32% in its shares.

U.S. Market Indices Decline

The impact of DeepSeek reverberated throughout U.S. stock market indices. The tech-heavy NASDAQ Composite Index dropped by 3.1%, marking the largest one-day decline in recent months. The S&P 500 Index, which had recently reached record highs, fell by 1.5%. In contrast, the Dow Jones Industrial Average, which has lesser exposure to big tech, managed to gain 0.7%. J.J. Kinahan, CEO of IG North America, noted that this sell-off was an inevitable outcome in the current market climate. The energy sector also took a hit, particularly affecting companies linked to the rising demand for AI-related power. Constellation Energy, which has been at the forefront of the AI revolution, experienced a 21% drop in stock value.

Increased Demand for Bonds

In light of the market turbulence, investors sought refuge in U.S. government bonds, which are often seen as safe havens. The yield on the 10-year Treasury dropped to 4.529%, reflecting increasing demand for these bonds. In the cryptocurrency realm, Bitcoin briefly fell below the $100,000 mark but recovered to settle at $101,405 at market close, indicating a fluctuating yet resilient market.

Over One Trillion Dollar Loss

The steep decline in the stock prices of American tech companies resulted in losses exceeding one trillion dollars in market capitalization. A significant portion of this loss can be traced back to NVIDIA, whose market cap decreased by nearly $600 billion. Oracle incurred a loss of approximately $70.81 billion in market cap. The financial impact rippled across other major players too, including Google, Tesla, Microsoft, and Super Micro Computers, each experiencing substantial declines in their market cap.