NVIDIA Shares Drop 15% Following DeepSeek R1 Unveiling

This week, the AI industry was shaken up quite dramatically with the debut of DeepSeek’s R1 model. It’s being touted as a game-changer, boasting superior performance compared to OpenAI’s solutions but at a mere 3% of the cost. This surprising revelation has sent ripples through the tech sector, causing stock values to tumble, with NVIDIA taking the hardest hit—losing a staggering $500 billion in market value within just one day. It’s a scenario that could potentially worsen, setting records NVIDIA would rather avoid. By early afternoon, NVIDIA’s shares had plunged over 15%, underscoring the widespread impact of DeepSeek’s announcement across major tech companies.

In terms of financial devastation within a single day, NVIDIA’s losses might break records. To give some perspective, they already hold the unfortunate record, having lost $279 billion in market value on September 3, 2024. As of when this article was written, the stock market itself isn’t doing great either; the NASDAQ has dipped by 3.43% and the S&P 500 by 1.9%.

Owing to today’s massive financial hit, NVIDIA no longer holds the crown for being the most valuable company worldwide. Apple has overtaken them, and even Microsoft has leapfrogged ahead, although Microsoft’s stock has slipped by about 3% today as well.

NVIDIA’s dramatic stock dive comes right on the heels of DeepSeek unveiling its R1 language model, which reportedly surpasses OpenAI’s existing models in performance while operating at just a fraction of the cost. It’s almost ironic—DeepSeek relied on NVIDIA GPUs to train the R1 model. At first blush, that might seem like great news for NVIDIA. However, if DeepSeek transforms the AI market as promised, the tech giant could be in trouble.

Traditionally, training AI models hasn’t been cheap. Just to illustrate, OpenAI reported a loss of $5 billion in 2024, and its daily operational costs for running ChatGPT hover around $700,000. With DeepSeek’s R1 promising comparable performance at significantly reduced costs, there’s potential for a dramatic shift in the AI landscape.

Should other businesses find ways to develop competitive AI models at a reduced cost, much like DeepSeek suggests, it could seriously undermine the value that big players like OpenAI, Google, and Meta bring to the table.