Shares of US-based chipmaker NVIDIA saw a significant recovery on Tuesday, January 28, climbing 8.82% to close at $128.86 per share. This came after a sharp 16.86% drop the day before, when the stock fell to $118.58. The drastic decline was driven by a global market rout sparked by Chinese startup DeepSeek’s developments in artificial intelligence.
Despite the rebound, NVIDIA’s stock remains below the previous week’s levels. Although the immediate concerns about DeepSeek have eased, the competition remains a cause for worry.
Why NVIDIA’s Stock Dropped
On Monday, January 27, NVIDIA suffered a massive loss, shedding nearly $600 billion in market value. This was the largest single-day drop for any US company in history. It marked NVIDIA’s worst trading day since March 16, 2020, during the early days of the Covid-19 pandemic.
The sell-off was triggered by growing concerns over DeepSeek, a Chinese lab that introduced a large language model in late December 2024. DeepSeek claimed it built the model in just two months for under $6 million using NVIDIA’s H800s chips, which are lower in capability compared to NVIDIA’s high-end chips.
The Growing AI Competition
The rise of DeepSeek has raised fears about intensified competition in the AI sector. Experts have cautioned that the company’s achievements could disrupt the chip market, with NVIDIA potentially facing challenges to its dominance.
Guy Miller, chief market strategist at Zurich Insurance, highlighted the broader implications. “Investors have been reminded that even technology stocks need to have a risk premium,” he said. He added that the recent downturn in tech stocks is “a healthy reminder that nothing in markets, or in technological development, is a straight line.”
Experts Remain Cautious
Despite the rebound, analysts remain uncertain about NVIDIA’s future. David Morrison, senior analyst at Trade Nation, noted that it’s hard to determine whether the worst is over for NVIDIA or if this marks the peak for US equities. He emphasized that it’s challenging to predict the next move in such an unpredictable market.
On the other hand, Kathleen Brooks, research director at XTB, expressed her belief that the NVIDIA sell-off might have been an overreaction. She also questioned the validity of DeepSeek’s claims about developing the AI model so cheaply. “It may be too early to write off NVIDIA yet, even though the prospect of a Chinese rival is causing a crisis for the chip maker,” she said.
NVIDIA Faces Tough Competition Ahead
Overall, while NVIDIA has recovered somewhat, the company still faces significant challenges ahead. The threat from DeepSeek and other potential competitors in the AI space remains a key concern. Despite this, NVIDIA continues to play a crucial role in the chip industry and may find ways to maintain its competitive edge moving forward.