Zinger Key Points
- Nvidia crashes 16% to $178, losing its 200-day moving average, marking its worst session since March 2020.
- Nvidia wipes out over $600 billion in market cap, setting a record for the largest single-day loss.
- Get Wall Street's Hottest Chart Every Morning
Nvidia Corp. NVDA lost a key technical support on Monday, breaking below its 200-day moving average after a staggering selloff. The slump followed the launch of DeepSeek, a Chinese open-source AI platform, which triggered investor concerns over demand for Nvidia's premium chips.
Nvidia Loses Key Technical Support In Major AI Shakeup
Nvidia’s stock had plunged 16% to $178 per share by 3:15 p.m. ET, marking its worst session since March 18, 2020. This drop generated a major technical reset, as the stock had remained above its 200-day moving average since January 12, 2023.
The U.S. largest semiconductor company also wiped out over $600 billion in market capitalization, setting the largest single-day loss in U.S. stock market history.
Leveraged exchange-traded funds tracking Nvidia stock such as the Direxion Daily NVDA Bull 2X Shares NVDU and the GraniteShares 2x Long NVDA Daily ETF NVDL both cratered by 35%.
DeepSeek's AI Surge Reshapes Market Expectations
On the CFTC-regulated platform Kalshi, the odds of DeepSeek winning “Best AI Model of the Year” skyrocketed from 25% to 46% on Monday. The surge came as the Chinese large language model dominated App Store downloads, signaling strong early adoption.
“Monday’s tech selloff is being driven by a fundamental catalyst: concerns that DeepSeek is surpassing ChatGPT in usage and could reduce demand for Nvidia's most advanced chips,” said David Bahnsen, chief investment officer at The Bahnsen Group.
David Morrison, senior market analyst at Trade Nation, highlighted that DeepSeek has achieved this feat “at a fraction of the cost, using less powerful Nvidia chips, effectively bypassing U.S. export restrictions.”
With Nvidia's next earnings report scheduled in a month from now, Wall Street is weighing whether its AI-driven capital spending may be outpacing revenue growth.
“The key question is whether Nvidia will disappoint, as its capital spending on AI is soaring faster than its revenues, which could squeeze profit margins,” said veteran market strategist Ed Yardeni.
Security Concerns Surround DeepSeek's Rise
Cybersecurity expert Adrianus Warmenhoven of NordVPN warned that DeepSeek's rapid adoption raises serious privacy and security concerns, particularly given China's strict regulatory environment.
“The emergence of startups like DeepSeek presents both opportunities and risks for user security. It's crucial to approach these platforms with caution, especially given the stark differences in global data privacy laws,” Warmenhoven said.
He highlighted the potential risks tied to China's government oversight on data collection, storage, and usage, adding that users outside of China should be wary of how their interactions with DeepSeek are being tracked and processed.
“China has some of the world's most stringent regulations on data access and state surveillance. If DeepSeek gains international traction, users must understand what data they are sharing and where it's being stored,” he said.
Warmenhoven also indicated that AI-driven applications are prime targets for cyber threats, and that DeepSeek’s sudden popularity could make it an attractive vector for exploitation.
“We've seen in the past how new AI platforms can be vulnerable to security flaws, and DeepSeek is no exception.” “Furthermore, there is always the risk of cyber attacks,” he added.
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