Nasdaq: Nvidia Plunge Sends Shockwaves Through Tech Sector, Bitcoin and Crypto Markets

Chip Stock Rout Casts Shadow on Tech and Crypto Markets

The global market selloff triggered by Chinese AI startup DeepSeek’s cost-efficient innovations is sending shockwaves across tech stocks, cryptocurrencies, and semiconductor firms. Investors are grappling with the potential impact of DeepSeek’s breakthrough on the high valuations tied to AI infrastructure, with Nvidia facing the brunt of the fallout.

DeepSeek’s AI Model Puts U.S. Tech Dominance in Question

DeepSeek announced a free, open-source AI model that challenges leading systems from OpenAI and Meta. Built with only $6 million and Nvidia’s less-powerful H800 chips, the model raises questions about the long-term profitability of U.S. firms pouring billions into AI development. Third-party benchmarks suggest DeepSeek’s model outperforms rivals in accuracy while being vastly cheaper to produce, disrupting assumptions about AI’s demand for high-performance hardware.

Nvidia, the AI sector’s bellwether, saw its shares plunge over 10% in pre-market trading. Broader chip-related stocks, including AMD and Broadcom, also experienced sharp declines, signaling a recalibration of investor expectations for AI-driven growth.

Tech Selloff Sends Cryptocurrencies Lower

The tech slump has reverberated into cryptocurrency markets. Bitcoin slid 5.5% to below $99,000, Ethereum dropped 8.6%, and XRP tumbled 11%. Cryptocurrencies, highly sensitive to shifts in risk sentiment, are also under pressure from fears that lower-cost AI development could reduce demand for chip-reliant blockchain systems.

Futures for the Nasdaq Composite dropped 3.1%, pointing to continued selling pressure in high-growth sectors. The selloff has reignited concerns over the sustainability of the so-called “Magnificent 7” companies—like Nvidia, Meta, and Amazon—that led 2023’s market gains.

Nvidia’s Risk Lies in Its AI Dependence

Nvidia’s fortunes are tightly linked to AI spending, as its high-margin H100 chips power the data centers and training models of leading AI companies. DeepSeek’s success in developing efficient alternatives threatens to erode Nvidia’s pricing power and dampen demand. Nvidia’s stock, which has soared more than 900% since late 2022, may be particularly vulnerable as markets reprice expectations.

Nvidia shares are currently down over 10% in pre-market trading.

Japanese chipmakers also felt the impact, with Advantest and Tokyo Electron both tumbling Monday. The broader semiconductor industry faces increasing pressure as the DeepSeek development highlights a potential pivot in AI production away from high-performance hardware.

Market Forecast: Increased Volatility for Speculative Assets

Traders should brace for heightened volatility across tech stocks and cryptocurrencies as markets re-evaluate AI’s role in driving future growth. Nvidia, along with other AI-exposed firms, faces near-term pressure as cost-effective alternatives reshape investor sentiment. Cryptocurrencies are likely to remain bearish as risk appetite diminishes. Caution is warranted as speculative assets undergo further valuation adjustments.

More Information in our Economic Calendar.