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Nvidia (NVDA-5.05%) stock saw a slight turnaround Tuesday morning after the chipmaker suffered its biggest single-day market value loss because of an artificial intelligence chatbot challenger in China.
Shares of the AI chipmaker were up 2% in pre-market trading, after closing down almost 17% on Monday, to $118.58. Nvidia shed almost $600 billion in value in a single day, the largest of any U.S. company in history, and lost its spot as the world’s most valuable company, bringing its market capitalization to $2.9 trillion.
Other major chip stocks also sank Monday, including ASML (ASML+4.29%), Broadcom (AVGO-0.68%), Super Micro Computer (SMCI-0.78%), Micron (MU+0.74%), and Taiwan Semiconductor Manufacturing Co. (TSM+0.20%) That sent the tech-heavy Nasdaq down more than 3%. In all, markets saw roughly $1 trillion in market cap loss to start the week.
Traders fled the tech sector in response to Chinese firm DeepSeek’s announcement last week that it launched a model that rivals OpenAI’s ChatGPT and Meta’s (META+0.60%) Llama 3.1 — and which rose to the top of Apple’s (AAPL+0.29%) App Store over the weekend. Some analysts warned that DeepSeek’s model, which was built using less energy and with lower cost chips, could pose a threat to U.S. dominance of AI development.
As its stock plunged, Nvidia said in a statement Monday that DeepSeek is “an excellent AI advancement and a perfect example of Test Time Scaling.”
“DeepSeek’s work illustrates how new models can be created using that technique, leveraging widely available models and compute that is fully export control compliant. Inference requires significant numbers of NVIDIA GPUs and high-performance networking,” a spokesperson said.
Markets were relatively flat as of Tuesday morning, with Nasdaq futures up just 0.11%. Contracts for the Dow Jones Industrial Average slipped 46 points, and S&P 500 futures ticked up 0.05%. Broadcom also rose almost 3%.
The sell-off Monday underscored just how concentrated the market has become. Leaders in the AI and chip space, including the so-called Magnificent 7 stocks, drove much of the market’s returns in 2024.
Economists at Goldman Sachs (GS+0.22%) have warned that the “extremely high level of market concentration” poses significant risks to future returns from the broader market. The analysts said the premium valuation for the top 10 stocks is the largest since the peak of the dot-com bubble in 2000. These 10 companies, which include Apple, Microsoft (MSFT-0.80%), Amazon (AMZN-0.33%), Nvidia, Alphabet (GOOGL+0.33%), and Meta, accounted for 36% of the S&P 500 and drove much of the index’s returns last year.