Is the Chinese AI DeepSeek going to topple AI as we know it in the United Stated and the Western hemisphere? The answer remains to be seen but the destruction of value in just a single trading session in AI-related leaders is now approaching $500 billion.
China’s DeepSeek has taken over the narrative surrounding the countless billions of dollars that have been spent by U.S. and other companies to take AI to the next level. The notion of safety and intellectual property will have a huge role in the narrative after today. Until then, the carnage of AI leadership stocks is almost hard to imagine.
Last week’s announcement that the US-led Stargate AI project’s price tag of $500 billion was a huge boost for the AI sector. The DeepSeek news from China has wrecked all of those gains and then some. The question to ask — Where do we go from here? Nvidia was mentioned as a valued partner for the Stargate Project.
The news that DeepSeek was fine-tuned with less than $6 million in investment has shares of NVIDIA Corporation (NASDAQ: NVDA) and any other related AI chip stocks reeling. While this $6 million number absolutely highlights just how expensive all the AI equipment and systems cost, many will question what it really was — or if it is even real in the capital costs.
There is another question to ask — Will U.S. companies adopt a Chinese AI model? Ask yourself that question a few dozen more times.
Mark Andreesson posted on X — Deepseek R1 is AI’s Sputnik moment.
Shares of NVIDIA were last seen down 12% at $125.25 right before Monday’s opening bell. Keep in mind that a 10% move in either direction represents about $300 billion in market capitalization since NVIDIA was a member of the $3 trillion (market cap) club).
BofA’s Vivek Arya says that DeepSeek created overstated concern although non-AI semiconductor stocks still look mixed into the first quarter. His report noted that the DeepSeek lab released a free and open source R1 model that outperforms the best of western AI models. He said, “While DeepSeek’s relatively low cost and short time to train its latest R1 model is impressive, we highlight every major US-based hyperscaler is raising their capex outlook…”
CFRA (S&P) analyst Angelo Zino noted that DeepSeek creates major uncertainty for the chip industry and his commentary is by and large more cautious than most analysts are addressing on Monday. With semiconductor stocks sharply lower, DeepSeek’s release has reportedly outperformed OpenAI’s most advanced models and was the most downloaded app on Apple’s App Store. That report said:
We think investors should take the innovation from China seriously, as it puts into question whether the current pace of capex spend/technology upgrades is necessary. Commentary from U.S. hyperscalers will be key this week to see if they remain aggressive with AI spend (access to GPUs a competitive advantage), but we think that they will likely stress the need for greater compute as we shift toward Agentic AI and Physical AI. Still, we think heightened risks may cause multiples for leading edge chipmakers to compress, with those most at risk being NVDA, MRVL, AVGO, AMD, and MU.
Three other report summaries were also seen on Monday:
- Citigroup’s Atif Malik maintained a Buy rating and $175 price target on NVIDIA, noting that DeepSeek’s feats were likely done advanced GPUs.
- Raymond James analyst Srini Pajjuri has reiterated a Strong Buy rating on Nvidia stock.
- Nvidia was reiterated as Buy and its price target was maintained at $200 at Cantor Fitzgerald.
But what about the dollars lost elsewhere?
Broadcom Inc. (NASDAQ: AVGO) was last seen down 12% at $215.75 after closing at $244.70 on Friday. That’s over $100 billion in market cap erosion.
Marvell Technology, Inc. (NASDAQ: MRVL) was last seen down almost 14% at $107.00 after closing at $124.02 on Friday. That’s about $10 billion in lost market cap.
Advanced Micro Devices, Inc. (NASDAQ: AMD) was last seen down 4.7% at $117.00 after a prior close of $122.84. That’s nearly $10 billion in lost market cap.
Micron Technology, Inc. (NASDAQ: MU) was last seen down 8.4% at $94.50 on Monday morning after closing at $103.19 on Friday. That’s about $9 billion lost in its market cap.
Palantir Technologies Inc. (NASDAQ: PLTR) is not into chips but has been a huge AI winner. Palantir was last seen down over 4% at $75.65 on Monday, a loss of nearly $7 billion in market cap.
Oracle Corporation (NYSE: ORCL), the dominant US company from Stargate, was last seen down 7% at $170.30 on Monday. That’s a loss of nearly $30 billion in market cap.
Microsoft Corporation (NASDAQ: MSFT), which owns the lion share of OpenAI’s future profits for years into the future (and committed to deep AI spending on its own), was last seen down 3.5% at $428.35. That’s about $100 billion in lost market cap.
Alphabet Inc. (NASDAQ: GOOGL) has been spending its own cash for Gemini in AI and its stock was last seen down 3% at $194.25. That’s nearly $70 billion in lost market cap.
Meta Platforms, Inc. (NASDAQ: META) was last seen down 1.5% at $637.50 on Monday. It’s also committed to billions of dollars in AI-related spending. That’s nearly $25 billion in lost market cap.
Whether or not these losses hold remains to be seen. There are some interesting dilemmas and stipulations to what any Chinese AI program or standard would able to see prolific use by U.S. companies. By using the Chinese AI, wouldn’t that be making Chinese AI that much smarter and more widely distributed? The U.S. government may have something to say about that.
Huge changes that occur in almost an instant like this are rarely resolved in hours or days. Stay tuned.
