Wed Jan 29 13:42:32 IST 2025: ## China’s DeepSeek AI Model Triggers Historic Stock Market Selloff, Then a Dramatic Rebound

**New York, NY –** The release of a cost-effective artificial intelligence model by China’s DeepSeek sent shockwaves through the US stock market on Monday, triggering a massive selloff that saw Nvidia, a leading AI chipmaker, lose a record-breaking $589 billion in market capitalization. However, a dramatic turnaround on Tuesday saw Nvidia recover 44% of its losses, adding $260 billion to its valuation—a feat surpassed only once in history for a single-day market value increase.

The initial plunge, described by some analysts as “excessive,” affected major tech companies, with Nvidia and Oracle experiencing the most significant drops. The S&P 500 fell 1.5%, and the Nasdaq plummeted over 3%. Billionaire investors, including Larry Ellison (Oracle) and Jensen Huang (Nvidia), experienced substantial paper losses.

Concerns centered on DeepSeek’s R1 model, which reportedly rivals OpenAI’s offerings but was developed at a fraction of the cost. This raised questions about the sustainability of the current AI investment cycle and the potential for cheaper alternatives to disrupt the market dominance of US tech giants.

Analysts offered mixed reactions. Some, like Morgan Stanley, maintained a bullish outlook on Nvidia, citing potential upside despite lowering price targets due to the “deflationary” impact of DeepSeek’s model. Others questioned whether the initial market reaction was overblown.

The event also sparked a geopolitical debate, with some suggesting that US export controls aimed at hindering China’s AI development might have inadvertently spurred innovation. The Global Times, a Chinese state-run media outlet, echoed this sentiment.

Apple, meanwhile, emerged as a relative winner, benefiting from its more cautious approach to the generative AI arms race. Analysts pointed to Apple’s strong consumer distribution platform as a key advantage in the evolving AI landscape.

The two-day rollercoaster ride highlights the volatility of the tech sector and the intense competition in the global AI race. While Nvidia’s rebound suggests investor confidence may be returning, the impact of DeepSeek’s model and its potential implications for the future of the AI industry remain to be seen. The coming week will bring further scrutiny, with several major tech companies set to report their fourth-quarter earnings.

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