Tue Jan 28 18:02:03 UTC 2025: ## Nvidia Stock Plunges After Chinese AI Rival Unveils Cost-Effective Model

**New York, January 28, 2025** – Nvidia, the leading graphics processing unit (GPU) maker, experienced a dramatic market cap drop of $589 billion on Monday, January 27th, following the release of a new artificial intelligence model by Chinese startup DeepSeek. This represents the largest single-day decline in stock price in Nvidia’s history, and follows a $279 billion loss in September 2024. Despite this significant setback, Nvidia’s stock remains up 90% year-on-year, closing at $3.49 trillion.

The DeepSeek R1 AI model reportedly matches the performance of competitors like ChatGPT at a fraction of the operational cost. While Nvidia publicly praised DeepSeek’s achievement, market analysts expressed concerns that this technological advancement could spark price competition, squeezing profit margins in the AI hardware sector, particularly for specialized GPUs like those produced by Nvidia.

The sudden drop has sparked debate about the future of Nvidia and the broader AI market. Some analysts, such as John Belton of Gabelli Funds, voiced concerns about the potential for further innovation and increased demand driven by DeepSeek’s breakthrough, while others, like Antonio Di Giacomo of XS.com, remain confident in Nvidia’s long-term dominance due to its established position and adaptability.

Bob Lang, President/Chief Options Strategist at Aztec Capital, suggested that the market’s reaction might be overly panicked, urging caution against knee-jerk reactions by investors. Conversely, Subho Moulik, Founder and CEO of Appreciate, posited that increased AI efficiency, driven by technologies like DeepSeek R1, could paradoxically boost demand for Nvidia’s products through a “Jevons Paradox” effect – where greater efficiency leads to increased consumption. Moulik suggested that Nvidia, along with other impacted semiconductor companies like Broadcom and Micron Technology, could represent attractive buying opportunities following the recent downturn.

The dramatic Nvidia plunge overshadowed a positive day for Indian banking stocks, which experienced a rally following a liquidity infusion by the Reserve Bank of India. However, profit-booking in the late trading session limited overall gains.

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