The AI market was rocked this week as DeepSeek launched its R1 model, which claims superior performance to OpenAI's technology at just 3% of the cost. That news sent NVIDIA stocks plummeting and caused the stock of several tech giants to drop. The most significant loss was seen by NVIDIA, which dropped at least $500 billion in market value in a day. That figure could easily soar higher and set records that NVIDIA likely does not want to be a part of. NVIDIA stock fell over 15% by the early afternoon and the effects of DeepSeek's announcements extend to other tech giants as well.
NVIDIA's massive loss would easily be the most a company has lost in market value in a single day, but we'll have to wait until the end of trading to see which records are set. NVIDIA already holds the record for market loss in a day, having lost $279 billion in value on September 3, 2024.
At the time of publication, the NASDAQ is down 3.43% and the S&P 500 is down 1.9%.
Today's market value loss is so large that NVIDIA is no longer the most valuable company in the world. NVIDIA ceded that title to Apple and also fell below Microsoft though the latter has also seen a stock drop of around 3% today.
Why has NVIDIA stock fallen?
NVIDIA's loss in value comes immediately after DeepSeek announced the R1 language model. That model is said to outperform OpenAI's models while requiring only 3% of the cost.
Ironically, DeepSeek trained its R1 model on NVIDIA GPUs. That may seem like it would be a win for NVIDIA, but it could pull the rug out from under the current AI market. Training AI models has been prohibitively expensive up to this point. Reportedly, OpenAI lost $5 billion in 2024 and the company spends $700,000 per day to run ChatGPT. If DeepSeek's R1 can keep up with OpenAI's o1 while requiring only 3% of the cost, the company could turn generative AI on its head.
If other companies are able to create competitive generative AI models for a fraction of the cost of what OpenAI, Google, and Meta spend, that would devalue the work of those tech giants.
