Sun Feb 02 17:50:00 UTC 2025: ## AI Stock Market Shockwave: DeepSeek Challenge Triggers Massive Selloff

**London, Jan 28** – The global AI and semiconductor markets experienced a dramatic downturn on January 27th following a challenge to Silicon Valley’s dominance from Chinese AI lab DeepSeek. Nvidia, a leading US AI company, suffered a staggering 17% single-day loss, triggering widespread losses across related funds and ETFs.

Leveraged ETFs, which amplify returns, were particularly hard hit. Leverage Shares 3x NVIDIA ETP, for example, plummeted 51%, reflecting the tripled impact of Nvidia’s decline. Other leveraged ETFs tracking Arm, AMD, and even cryptocurrency platforms like Coinbase also experienced significant losses. The volatility underscores the high risk associated with leveraged investments, which are not suitable for long-term holding.

The DeepSeek announcement also impacted the cryptocurrency market, with Bitcoin initially dropping but subsequently recovering some of its losses. Morningstar’s Chief Investment Officer, Dan Kemp, attributed the cryptocurrency volatility to its inherent lack of intrinsic value and suggested that reduced demand for Nvidia chips in Bitcoin mining, due to DeepSeek’s advancements, may have contributed to the decline.

Traditional funds also felt the impact. Polar Capital Smart Energy, for example, suffered an 8.42% loss, partly due to its holdings in Broadcom, another semiconductor company affected by the news. Several other technology and alternative energy funds experienced significant declines.

While some ETFs focused on semiconductors showed substantial two-year gains prior to the selloff, the events of January 27th highlight the inherent risks in the tech and AI sectors, particularly with leveraged investment products. Experts warn investors to exercise caution and seek professional advice before investing in high-risk assets.

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