The surprise
success
of a Chinese AI startup is
hammering
U.S. tech stocks. That includes
Nvidia
, the California chip behemoth that has added nearly $3 trillion in market capitalization over the past three years.
On Monday, Jensen Huang’s company had shed roughly $600 billion in market cap while its stock dropped 17% as part of a broader rout of the tech sector. DeepSeek’s
shocking success
has undermined the perceived dominance of U.S. firms in emerging AI technology, a centerpiece of the broader bull case for stocks in 2025. The tech-laden
Nasdaq
Composite sank more than 3%.
Unsurprisingly, many of Nvidia’s competitors and suppliers also took a big hit. Chipmaking conglomerate
Broadcom
saw its stock plunge over 19%, while U.S.-listed shares of
Taiwan Semiconductor Manufacturing
Co., or TSMC, dropped more than 15%. In turn, the stock of TSMC’s most important supplier, Dutch equipment maker ASML, fell nearly 8%.
In general, companies that have seen their valuations soar thanks to
AI hype
have been most exposed to the selloff. Shares of Silicon Valley stalwart
Oracle
, one of the main investors in the newly announced $500 billion
Stargate Project
, plunged roughly 15%, eating into their 60% gain in 2024.
Last year, previously unsung
utility companies
and land firms boomed as investors piled into popular AI
derivative plays
. Power companies
Vistra
and
Constellation Energy
were the second- and 10th-best performing stocks in the S&P 500 in 2024, respectively. On Monday, however, Constellation’s shares fell 20%, while Vistra’s lost more than a quarter of their value.
Texas Pacific Land Corp., a former Wild West–era land trust, took spot No. 6 on the S&P top performers’
list
as shares more than doubled on
hype
over a possible data-center buildout frenzy in West Texas. The company’s stock was down over 11%.
AI’s Sputnik moment
DeepSeek, a mysterious Chinese tech lab, is to blame for the doom and gloom. The company says its new large-language model was
developed
in just two months for under $6 million, or about 3% to 5% of what it reportedly cost OpenAI to develop its next-generation o1 counterpart. Last week, DeepSeek released a
report
that showed its model matching or exceeding o1’s performance on several critical benchmarks, and the company’s free app has overtaken OpenAI’s ChatGPT in downloads on Apple’s App Store.
Venture capitalist Marc Andreessen has called these developments “AI’s
Sputnik moment
,” referring to when the Soviet Union beat the U.S. in launching a satellite into space. However, Wedbush Securities’ Dan Ives, one of Wall Street’s most noted tech bulls, disagreed. While some of DeepSeek’s technological innovations are impressive, he said, the company will not be able to replicate the infrastructure and ecosystem of America’s tech giants, particularly the so-called Magnificent Seven. For example, no major U.S. company, he said, will use DeepSeek to launch their AI architecture and use cases.
“At the end of the day there is only one chip company in the world launching autonomous, robotics, and broader AI use cases,” he wrote in a
note
Monday morning, “and that is Nvidia. Launching a competitive LLM model for consumer use cases is one thing … Launching broader AI infrastructure is a whole other ball game, and nothing with DeepSeek makes us believe anything different.”
The pullback in U.S. tech, he said, was just another reason for investors to pile into companies typically trading at extremely high premiums.
“These are just the opportunities to own the Nvidia,
Microsoft
,
Alphabet
, Palantir,
Salesforce
,
Amazon
, and broader tech ecosystem that is under heavy pressure today,” he said.
Some traders seemed to be following that advice with Palantir, the S&P’s top performing stock in 2024. Its shares gained 340% in 2024 and rose briefly on Monday morning after a premarket plunge. The stock was down 7% from Friday’s close as of mid-afternoon.
Update: This story was updated to reflect stock movements in the mid-afternoon on Monday.
