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Nvidia lost nearly $600 billion in market cap yesterday, plunging 17%, as the AI trade unraveled following China’s DeepSeek breakthrough.
Forbes says this is the single greatest one-day wipeout for a stock in history.
For context: DeepSeek, a China-based startup spun out of a quant hedge fund, unveiled a model trained for just $6 million, that outperforms state-of-the-art reasoning models from OpenAI.
Investors are now questioning the enthusiasm of US Big Tech, which recently announced investments of hundreds of billions in chips to build large-scale AI infrastructure.
- Chip stocks were brutally crushed — beyond Nvidia, AI chip names like Broadcom, AMD, as well as memory names like Micron were down over 10%.
- Data centers — beaten similarly, as questions around ROI for large computing facilities mounted.
- Power — the power/utility guys had just gotten invited to the AI party. Companies like Vistra, Constellation were brutally hammered — down 20-30%.
In total, over a $1 trillion was wiped off stock market valuations in yesterday’s trading.
Some argue markets are overreacting, suggesting that cheaper AI could fuel faster adoption, boosting demand for AI inferencing hardware.
Simply put, training is when AI models are taught to become intelligent, while inferencing is when they respond to your questions. Each use case has unique hardware requirements.
The surprise: there is also a thesis that as AI models gets commoditized, companies operating the software and owning the application layer is where most opportunity will be locked. Cloud computing and SaaS stocks were actually popping off yesterday.
Watch out: the sell off could easily extend to the Indian market today. Several Indian data center stocks had rapidly gained in the recent times, including Anant Raj, NetWeb, and more.
