On January 27, 2025, the tech world experienced an unprecedented financial upheaval as Nvidia suffered the largest single-day market cap loss in U.S. history: a staggering $600 billion. Known for its dominance in the AI chip market, the company’s stock plummeted 17% in a single trading session, sending shockwaves through global markets and raising serious concerns about the sustainability of the AI sector’s explosive growth. What unfolded wasn’t just a difficult day for Nvidia—it was a wake-up call for an industry navigating the pitfalls of its own meteoric ascent.
The catalyst for this seismic event came from China’s AI lab, DeepSeek, which unveiled a free, open-source large language model (LLM) using surprisingly cost-effective methods. What set DeepSeek apart wasn’t just its technological achievement; it was the astounding efficiency of its development. The lab built its model using less than $6 million in investment and relied on budget Nvidia H800 chips, effectively challenging the assumption that cutting-edge GPUs were indispensable for groundbreaking AI advancements. If DeepSeek could achieve such results with reduced-capability hardware, what would this mean for organizations continuing to rely on Nvidia’s high-performance, high-cost chips? This question sent investors into a panic.
Nvidia’s stock closed the day at $118.58, marking its steepest percentage drop since the early days of the COVID-19 pandemic. The ripple effect was immediate and widespread. The tech-heavy Nasdaq index fell by 3.1%, and major players in Nvidia’s supply chain and customer ecosystem faced steep declines. Data center giants such as Dell, Oracle, and Hewlett Packard Enterprise saw their share prices nosedive, while Broadcom, another vital AI chip supplier, shed $200 billion in market capitalization. For perspective, Nvidia’s $600 billion meltdown dwarfed the previous records set by Meta in 2022 ($232 billion) and Apple in 2020 ($182 billion).
The collapse also impacted Nvidia’s larger-than-life CEO, Jensen Huang, whose persona has long been synonymous with the rise of artificial intelligence. Huang’s personal net worth fell by $21 billion, dropping him to 17th place on Forbes’ list of the world’s richest individuals. Speaking at a press conference, Huang sought to turn the focus toward lessons learned. “This isn’t just about competition,” he commented. “It’s about resilience, adaptability, and innovation in a fast-evolving landscape.”
Meanwhile, DeepSeek’s achievement reverberated beyond financial markets. By the weekend following its surprising announcement, the lab’s AI app overtook OpenAI’s ChatGPT as the most downloaded free app in the U.S. Apple App Store. The swift success not only underscored DeepSeek’s rise but also highlighted shifting geopolitical dynamics within tech innovation. Despite U.S. export bans on advanced chips to China, DeepSeek’s achievement demonstrated the ability of non-Western players to circumvent constraints and find alternative pathways to breakthrough innovations.
Washington wasn’t silent in the face of the upheaval. David Sacks, the newly appointed AI and crypto czar under President Donald Trump, weighed in, praising DeepSeek’s ingenuity while calling for renewed focus on AI competitiveness in the U.S. “The lesson here isn’t just about chips or software,” Sacks stated. “It’s about leadership, vision, and refusing to be out-hustled.” Analysts echoed his sentiment, albeit with mixed predictions. Some, like investment firm Cantor, called the selloff an overreaction, arguing that the demand for computing power would only increase as AI continues to advance. They encouraged investors to see Nvidia’s dip as a buying opportunity. Others, however, questioned whether Nvidia’s extraordinary growth—bolstered by a 239% stock surge in 2023 and another 171% in 2024—had finally reached its ceiling.
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