 "DeepSeek's claims of having developed an AI for a fraction of the cost it has taken for Western developers has led to chipmaker Nvidia's stock registering losses. Reuters")
Shares of US-based chipmaker Nvidia on Tuesday (January 28) managed to claw back gains of 8.82 per cent, closing at the price of $128.86 apiece.
The upward momentum in Nvidia’s share price came a day after the stock saw a massive drop of 16.86 per cent, leaving the shares value at $118.58.
That stock value drop came with a global rout sparked by Chinese start-up DeepSeek’s advances in artificial intelligence.
But the company, which designs chips used in AI applications, is not out of the woods yet. Despite the improvement, its share price remains well below last week’s levels.
Moreover, while some of the anxiety surrounding the swift rise of DeepSeek has tapered off, concerns do remain.
As Guy Miller, chief market strategist at insurer Zurich put it, “Investors have been reminded that even technology stocks need to have a risk premium.” According to Financial Times, he believes that the tech rout has been “a healthy reminder that nothing in markets, or in technological development, is a straight line.”
Why Nvidia stocks fell
Nvidia lost close to $600 billion in market cap on Monday (January 27), the biggest drop for any company on a single day in US history.
It was Nvidia’s worst day on the market since March 16, 2020– early during the Covid pandemic, CNBC reported.
The sell-off was triggered by worries that the Chinese lab DeepSeek is intensifying competition in the global AI landscape.
In late December 2024, DeepSeek had introduced a free, open-source large language model, claiming it took only two months and less than $6 million to develop, using reduced-capability chips from Nvidia known as H800s.
Experts remain cautious
David Morrison, senior analyst at Trade Nation said that it was “difficult to work out if the worst is now over,” or if the slump was just another sign that “the top is already in for US equities.”
Kathleen Brooks, research director at XTB, said that the Nvidia sell-off “may have gone too far”, adding that there were doubts over whether DeepSeek’s AI was developed as cheaply as it claims.
Impact Shorts
More Shorts“It may be too early to write off Nvidia yet, even though the prospect of a Chinese rival is causing a crisis for the chip maker,” she added.
With inputs from AFP