Nvidia loses nearly $600 billion in stock valuation as new AI model 'DeepSeek' enters market

If the sanctions on imports and increased tax weren’t enough, Nvidia is facing the biggest drop in its stock price with the rise of rival AI startups. On Monday, January 27th, the company lost $589 billion which is the biggest share drop in history. This came right after the announcement of an open-source AI model by China-based DeepSeek.

The problem isn’t the rival but its cost-effectiveness. DeepSeek's AI reportedly matches some of the top AI language models at a fraction of the cost. In a technical report for the DeepSeek AI, the company revealed that the language model for the AI was trained on Nvidia GPUs at a fraction of training other popular AI models like OpenAIs chatGPT.

Chinese AI Startup impacting Nvidia’s market presence

Training an AI model on older hardware performance which was already limited implies that other companies can also do the same. Nvidia is going full throttle on making some expensive high-end hardware which may become obsolete if companies can simply use the cheap variant. The demand for expensive AI chips will ultimately become lower.

DeepSeek AI reportedly cost less than $6 million to train and only took two months. The AI model was trained using a few thousand H800 (Hopper) GPUs which were performance-capped. There are doubts about these numbers with many claiming the real value is much higher. Surely, this isn’t China taking some grudge out on Nvidia for the recent ongoing conflicts.

Also Read: Nvidia slapped with antitrust investigation by China over AI chips

Impact on the gaming industry

As far as the gaming industry and gamers are concerned, this will not have much of an impact. Nvidia today has a massive market cap that it had back in 2020. This was thanks to everyone using their GPUs to train their AI models. It is also one of the reasons why the company has been leaning towards AI in the past few years.

Despite facing half a trillion loss, the company will likely be fine and keep making GPUs, a market which they dominate. If the report regarding DeepSeek AI is true, the company may see some competition moving forward.