Nvidia Posts Biggest Loss on Wall Street: What Rocked the AI Giant?

Shares of AI leader Nvidia (ticker NVDA.O) have plunged 17%, wiping out a whopping $593 billion in market value. The decline was the company's largest one-day loss in Wall Street history, LSEG notes. By comparison, Nvidia's previous record share price plunge, recorded in September last year, was more than half that.

The Chinese challenge: what's behind the fall?

A nasty surprise for Nvidia and its investors came from Chinese startup DeepSeek. The company introduced a free virtual assistant that uses cheaper chips and makes do with less data. This cast doubt on long-held expectations that artificial intelligence would drive demand across the entire tech chain – from chip makers to data centers.

Rise amid optimism and a rapid decline

Previously, Nvidia, like other major players in the tech sector, benefited from high interest in artificial intelligence. It was this optimism that fueled the stock market's sharp rise in 2024. But as quickly as the market took off, it also felt the blow.

Day in Review: Major Indices Lost Ground

The impact of events on the stock market was noticeable:

• The Dow Jones Industrial Average rose by 289.33 points (+0.65%) to 44,713.58;

• The S&P 500 lost 88.96 points (-1.46%) to end the day at 6,012.28;

• The Nasdaq Composite, the most sensitive to technology stocks, fell by 612.47 points (-3.07%) to 19,341.83.

At the same time, the Cboe VIX volatility index, known as Wall Street's "fear gauge," rose significantly, reflecting increased nervousness in the market.

Experts note that the decline in Nvidia shares could have been caused not only by external challenges in the form of DeepSeek, but also by overestimated investor expectations. The decline in S&P 500 shares was the largest since the beginning of the year, and growing volatility signals that the market is entering a period of increased instability.

How long this trend will last remains a question. However, one thing is clear: the world of artificial intelligence continues to surprise and challenge even its leaders.

The technology sector continues to fall: blows to industry giants

Amid escalating tensions in the technology sector, shares of several major companies at once showed a significant decline. Microsoft (MSFT.O) lost 2.1%, Alphabet (GOOGL.O), the parent company of Google, fell by 4.2%, and the manufacturer of server equipment for artificial intelligence Dell Technologies (DELL.N) fell by 8.7%.

Data centers under pressure

Data center operators, which are considered a key link in the development of artificial intelligence technologies, were not spared by the decline. For example, shares of Digital Realty (DLR.N), one of the largest players in this market, fell by 8.7%.

The negative trend also extended to energy companies, which play a key role in powering energy-intensive data centers. Vistra (VST.N) shares fell by a staggering 28.3%. This sector, previously considered promising amid the growth of AI technologies, is now facing unexpected challenges.

Awaiting quarterly reports and the Fed decision

Investors are focused on the quarterly results of key tech players this week. Among those set to report soon is Microsoft, which makes its shares especially interesting for market watchers.

Of no less interest is the Federal Reserve (Fed), which is preparing to announce its first decision on interest rates this year. Most experts predict that rates will remain at current levels. The decision is expected to be announced on Wednesday and could impact future market behavior.

Volatility Rises: Trading Day Review

Trading volumes on US exchanges reached 17.39 billion shares, significantly exceeding the average for the past 20 days (14.90 billion shares).

The Nasdaq exchange showed an imbalance: 1,839 shares rose in price, while 2,641 fell. This gives a decline-to-advance ratio of 1.44 to 1, which underlines the negative investor sentiment.

Markets Frozen in Anticipation

Amid turbulence in the tech sector and anticipation of key events such as corporate earnings and the Fed decision, markets are in a state of nervousness. The outlook for the coming days remains unclear, and investors are looking for cues to make decisions.

Global Storm in the World of Tech: Chinese AI Undermines Leaders

The tech sector is experiencing a second day of global decline, caused by the launch of a cheap Chinese artificial intelligence model. Investors have begun to question the industry giants' sky-high valuations and sustainable leadership, sparking a sell-off from Tokyo to Silicon Valley.

The launch of startup DeepSeek has become the catalyst for a massive decline in tech stocks around the world. The popularity of the new technology, which offers affordable AI solutions, has led to investor reconsiderations and increased tension in global markets.

Japanese tech under attack

Amid the global tech stock downturn, Japanese companies have come under intense pressure. Chip testing equipment maker Advantest (6857.T), which supplies Nvidia, fell 10% on Tuesday after losing another 9% on Monday.

Another casualty was chip manufacturing equipment maker Tokyo Electron (8035.T), which closed down 5.3%. SoftBank Group (9984.T), known for its investments in tech startups, was also hit, with its shares falling 6%.

Semiconductors Slip

The global semiconductor market also felt the pinch. The Philadelphia Semiconductor Index (.SOX) fell 9.2%, its biggest drop since March 2020. The sector's plight underscored its vulnerability to challenges posed by changing expectations around artificial intelligence.

Markets in South Korea and Taiwan remained closed during the period for the Lunar New Year, which partly slowed the spread of turbulence in the region.

Investor Focus on Risk: Market Revaluation

The massive decline in stocks has once again raised questions about the high concentration of technology companies in investment portfolios. According to experts, the stock indexes' high exposure to a small number of AI leaders has become a significant source of risk.

"The current sell-off highlights that many AI and technology companies are so priced that there is no margin for error," said David Bahnsen, chief investment officer at The Bahnsen Group.

He also noted that the large share of technology stocks in indexes and investor portfolios has long been an undervalued problem.

The decline in the shares of major tech companies is a sign of a new wave of awareness about market risks. The launch of affordable technologies such as DeepSeek could not only change the rules of the game, but also force investors to rethink their strategies.

As markets wait for stability, experts warn that the high concentration of assets in one sector could lead to even greater losses if the wave of sell-off continues.

Artificial intelligence: the boom that turned into a bust

Over the past year and a half, the hype around artificial intelligence has led to an unprecedented influx of capital into tech companies, driving their valuations to record highs. However, the sudden wave of sell-offs has shown that even the biggest names in the AI market are not immune to challenges from competitors.

A blow to tech giants and data centers

Tuesday was another difficult day for companies related to AI and data infrastructure. Malaysian conglomerate YTL Power (YTLP.KL) shed 7.5% in its share price, posting its third straight session of sharp declines, highlighting the pressure on the market not just in the U.S. but also in other key Asian markets.

Data center companies have been hit as investors rethink their view of artificial intelligence-related asset values.

How DeepSeek influence market conditions

Amid this volatility, all eyes are on DeepSeek, the startup that is driving change. Last month, the company's researchers unveiled the DeepSeek-V3, a model built using Nvidia's less powerful H800 chips. It cost just $6 million to develop, significantly less than its Western competitors.

Experts say DeepSeek's success is an important reminder that competition in the global AI arena is heating up, and even leaders like Nvidia could be losing ground.

A Cost-Effective Approach to Challenge the Giants

Charu Chanana, chief investment strategist at Saxo, emphasized that DeepSeek's moves prove that innovation is possible even at a lower cost.

"By building powerful AI models on less expensive and less sophisticated hardware, DeepSeek is challenging the massive investments that US tech giants are making in expensive infrastructure. This calls into question the sustainability of their long-term strategy," Chanana said.

This approach raises questions about the justification for billions of dollars invested by Western tech corporations and makes investors question the realism of their valuations.

This week, the market's attention is focused on upcoming earnings reports from tech giants. Executives at major corporations will be looking to calm investor jitters and build confidence in growth prospects.

However, questions remain about the future dynamics of AI. DeepSeek has demonstrated that success in this industry does not always require huge investments. This opens the door for new players and puts additional pressure on existing leaders.

US Energy Under Pressure: New AI Changes the Game

US energy, utility and gas stocks suffered significant losses on Monday, becoming some of the biggest losers of the day. The reason for this was new artificial intelligence technologies presented by Chinese startup DeepSeek, which cast doubt on the forecasts for growth in electricity demand in the US.

Why are energy companies losing ground?

Just a year ago, energy companies were among the leaders in the S&P 500, thanks to expectations of significant demand growth. These forecasts were based on the expected increase in the need for energy-intensive data centers needed to scale AI solutions.

However, a new development by DeepSeek has caused a revision of these expectations. The Chinese startup has developed a low-cost model of artificial intelligence that requires fewer resources and less time to train. This approach could lead to a decrease in overall energy demand and a slowdown in the growth of technology infrastructure costs.

Low-cost AI is a game changer

According to analysts, the success of DeepSeek's model could be the starting point for a global change in energy demand.

"If the efficiencies inherent in this open-source model are adopted by large corporations, it could significantly reduce energy demand in the IT sector," Evercore ISI analysts said in a note.

The speed of the model's development was also a significant factor: DeepSeek managed to create it in less than two months, and its training costs were significantly lower than those of similar solutions used in the United States.

Prospects for American companies

Experts note that the adaptation of DeepSeek technologies could lead to faster implementation of similar solutions in American companies. As analyst Hirs emphasized, if these models really become widespread, this will accelerate the development of artificial intelligence technologies, but at the same time will create serious pressure on companies specializing in energy.

"If American corporations begin to integrate this technology and adapt their algorithms, this will lead to an even greater decrease in demand for electricity," he noted.

Who else was hit?

The fall affected not only energy companies, but also producers of raw materials related to electricity generation. Investors, concerned about a possible decrease in resource consumption, began to get rid of shares of companies in this segment en masse.

However, the question remains as to how big an impact DeepSeek will have on the global market and whether it can become a catalyst for a new technological approach. In the coming weeks, investors will be focused on how American corporations will react and adapt to new challenges.

Energy Deal of the Year: Did Expectations Fail?

With natural gas expected to grow as a key resource for AI power generation, Constellation made a big purchase earlier this month. It acquired privately held gas producer Calpine Energy for $16.4 billion, one of the largest U.S. power deals ever.

The purchase reflected hopes for continued growth in gas consumption to power energy-hungry data centers. But a sudden decline in the sector's stock prices has raised questions about the value of the investment.

Gas sector under pressure: who suffered the most?

Amid the turbulence, shares of natural gas producers, which remains the main fuel for generating electricity in the United States, were also hit.

The largest independent gas producer EQT Corp (EQT.N) recorded a 9% decline in its share price. Also under pressure was Midstream Energy Transfer (ET.N), an operator of gas transportation infrastructure, which had previously announced requests for connections from dozens of data centers. However, this did not help the company avoid a fall - its shares fell by about 7%.

Why did the market falter?

Experts attribute the decline to two main factors:

• Technology is changing the rules of the game. A new development by the Chinese company DeepSeek, which allows using less energy-intensive solutions for training AI models, is forcing investors to revise their expectations regarding the future demand for electricity and resources;

• Risks of large-scale investments. The purchase of Calpine Energy, while a logical move in a high-growth environment, is now seen by the market as potentially risky, especially as demand growth slows.

Investors await clarification

The situation is causing concern among market participants. Many are awaiting further comments from company management and analysts that could clarify how the major players plan to adapt to the changes.

The question remains whether the Constellation deal will be a strategic breakthrough in the long term, or will it turn out to be one of the biggest overvalued risks in the US energy industry.