Nvidia Loses $400B in Value as Nasdaq Slumps on Chinese AI Growth

The tech-heavy Nasdaq took a sharp hit early Monday as news of a low-cost Chinese generative AI startup sent shockwaves through the market. This disruptive newcomer, seemingly outpacing established US tech giants, caught traders on Wall Street and global stock exchanges completely off guard.

Nvidia’s $400 Billion Setback

An AI pioneer like Nvidia saw its stock price drop 11% on Monday, wiping off around $400 billion in market value. However, a new rival from Hangzhou, a city in eastern China, called DeepSeek, has proven it can hold its own.

With solid losses at artificial intelligence (AI) powerhouse Meta, Microsoft, and Alphabet (Google’s parent company), tech-rich Nasdaq led major indices lower, sliding 2.7%.

In contrast to the billions that US IT companies have invested in artificial intelligence, DeepSeek claims to have spent just $5.6 million on model development.

America’s “tech dominance is being challenged by China,” XTB’s Kathleen Brooks stated. “The focus is now on whether China can do it better, quicker, and more cost effectively than the US, and if they could win the AI race.”

Comparisons to a “Sputnik Moment”

This week’s earnings reports from tech companies like Meta and Microsoft will provide an opportunity to discuss the rise of the Chinese firm, which venture capitalist Marc Andreessen has compared to a “Sputnik moment,” when the Soviet Union stunned the world with the 1957 orbital launch of a satellite.

“DeepSeek’s AI assistant is now the top-rated free application on Apple’s US App Store,” wrote FCA senior market analyst David Morrison in a note.

“Investors have been forced to reconsider the outlook for capital expenditure and valuations given the threat of discount Chinese AI models. These appear to be as good, if not better, than US versions.”

Stock markets in Asia and Europe fell earlier as investors processed the latest trade dispute between Trump and Colombia.

A week after taking office, Trump proposed a $500 billion initiative to fund the construction of artificial intelligence infrastructure in the US.

On Monday, IT and semiconductor companies were among the worst losers in Tokyo as the Nikkei ended in negative territory. Advantest fell more than eight percent and Tokyo Electron dipped over five percent.

The stock price of SoftBank, an investor in Trump’s artificial intelligence initiative, fell by about 8%.

Broader Economic Concerns

There are a lot of important financial events happening this week, including tech earnings, interest rate decisions by the Fed and the European Central Bank, and the release of inflation statistics in the US.

Stocks rose last week because people believe that if Trump becomes president again, he might be easier on international trade. On the other hand, concerns were raised when he threatened on Sunday to revoke the visas of government officials and impose a 25% tariff on Colombian imports, with the danger of the tariff increasing to 50% next week.

The action followed President Gustavo Petro’s decision to ban U.S. deportation aircraft. At first, Petro responded to Trump’s decision by announcing 25% retaliatory tariffs on US goods.

With Foreign Minister Luis Gilberto Murillo stating that they had “overcome the impasse,” Bogota eventually caved and agreed to accept the deported citizens.

Market Highlights as of 1450 GMT

• US Markets
  • Dow Jones dipped by 0.3% to 44,271.66.
  • S&P 500 slid 1.7% to 6,000.18.
  • Nasdaq saw the largest decline, falling 2.7% to 19,415.06.
• European Markets
  • FTSE 100 in London edged down 0.1%, closing at 8,495.07.
  • Paris’s CAC 40 dropped 0.4% to 7,899.44.
  • Frankfurt’s DAX declined 0.7%, settling at 21,237.11.
• Asian Markets (Closing Figures)
  • Tokyo’s Nikkei 225 fell by 0.9% to 39,565.80.
  • Hong Kong’s Hang Seng Index bucked the trend, rising 0.7% to 20,197.77.
  • Shanghai Composite inched down 0.1% to 3,250.60.

Currency Updates

• The Euro strengthened to $1.0510 (up from $1.0497 on Friday).
• The Pound also rose slightly, trading at $1.2499 (from $1.2484).
• The Dollar weakened against the Yen, falling to 154.29 yen (from 156.00 yen).
• The Euro gained marginally against the Pound, trading at 84.09 pence (up from 84.08 pence).

Commodities Performance

• Brent Crude Oil slipped 0.2%, priced at $78.30 per barrel.
• West Texas Intermediate (WTI) declined by 0.4%, settling at $74.40 per barrel.