Nvidia is facing its largest single-day market value loss in history, triggered by the announcement of an open-source AI model named R1 from the China-based company DeepSeek. This has led to a loss exceeding $600 billion in Nvidia’s valuation, resulting in a significant drop in its market standing.

The company’s stock price plunged over 17%, as DeepSeek’s R1 model showcased capabilities akin to those of established companies like OpenAI but at a fraction of the cost. Reports suggest that DeepSeek achieved its results with a budget of just $5.6 million, attributed to their optimized design of algorithms, frameworks, and hardware.

Although DeepSeek continues to utilize Nvidia hardware for its operations, the implications of such cost efficiency could potentially harm the demand for Nvidia’s high-end GPU products that have historically boosted its stock prices.

Forbes also approximated a drastic decline in the net worth of Nvidia co-founder and CEO Jensen Huang, from $124.4 billion to $107.5 billion.

“The DeepSeek news is clearly likely to put pressure on semiconductor stocks today and maybe in the coming days, until there is more clarity on its potential impact on AI chip demand,” commented Jefferies analyst William Beavington.

While Nvidia’s share price remains considerably higher than last year, this sharp decline is a stark wake-up call.

Nvidia’s Market Loss (Image credit: Getty Images)

In addition to Nvidia, the total valuation loss across US and European tech firms is expected to exceed $1 trillion, with other entities like Constellation Energy also suffering substantial losses.