Nvidia is no longer the world's most valuable company after shedding $589bn in market value on Monday following the launched of DeepSeek's R1 artificial intelligence chatbot, a powerful rival to ChatGPT that was developed by the Chinese firm at a lower cost.
The advanced chipmaker's stock price fell by around 17% from $142.11 to $118.58 per share in trade yesterday as the DeepSeek launch spooked investors concerned about the amount of capital being put into AI development by US companies.
The plunge cost the company the equivalent of Netflix's market capitalisation of the entire GDP of countries such as Ireland, Sweden or Belgium while CEO Jensen Huang saw $21bn wiped off his net worth due to the stock he holds in the company.
Last week, DeepSeek released its free AI assistant, developed with fewer Nvidia chips at a fraction of the cost of the leading AI models on the market, effectively circumventing US restrictions on the export of semiconductors to China.
R1 overtook ChatGPT as the most downloaded free application available on the App Store in the US on Monday.
"DeepSeek is an excellent AI advancement and a perfect example of Test Time Scaling," a spokesperson for Nvidia said in a statement.
"DeepSeek's work illustrates how new models can be created using that technique, leveraging widely available models and computing that is fully export control compliant.
"Inference requires significant numbers of NVIDIA GPUs and high-performance networking."
DeepSeek claims its model costs about $5.6m to train, showing up US companies that are investing many multiples of that to further develop their AI.
Dario Amodei, CEO of AI safety and research company Anthropic, has said that a model costs up to $1bn to train, and OpenAI, creator of ChatGPT, recently announced the $100bn Stargate data centre venture.
Influential figures in tech and AI praised DeepSeek, and warned that the US was in a battle to retain, or regain, its lead in the AI race.
Marc Andreessen, founder of Netscape and a prominent tech investor, described DeepSeek as a “profound gift to the world” and called the release of R1 "a Sputnik moment," referencing the shock to the US when Russia became the first country to put a satellite into orbit.
Similarly, Scale AI CEO Alexandr Wang, said the DeepSeek launch was "a wake up call for America," and said the US must "out-innovate and race faster" while further tightening export controls on chips.
Losses by Nvidia and other tech stocks saw the Nasdaq fall 3% and the S&P 500 closing 1.5% lower on Monday.
Interest in AI has powered the S&P 500 to growth of 24% in 2023 and 20% in 2024.
