Nvidia Stock Crashed 17% as DeepSeek OpenSource AI Revolution Slaps Down US Stocks

Wall Street feared Monday that a flashy showing by a Chinese open-source AI startup meant the Internet won’t need faster chips.

The decline in Nvidia shares was dramatic on Monday, starting off the morning with a bang. NVDA went into free fall right out of the gate. Within minutes of the stock exchanges’ opening, the hot chipmaker’s stock fell from $142 per share to $124 per share.

Nvidia Stock, Other Semiconductors Crash

After that, the Santa Clara, California company’s stock continued to tumble downhill before finding market support around the $118 level. Taiwan Semiconductor (NYSE: TSM) also fell by 14% on Monday. San Jose semiconductor company Broadcom (NASDAQ: AVGO) dropped by 17%.

What is the reason for all the chaos in semiconductors on Monday?

A Chinese open-source AI (artificial intelligence) startup by the name of DeepSeek, a project akin to California’s OpenAI, hit a big milestone. Downloads of its app overtook ChatGPT on the Apple app store.

Following an open-source model, DeepSeek boasts it can provide the same services as ChatGPT at a lower cost.

Open source is a development and distribution model for information products like software that foregoes the advantages of copyright protection, a closed team for those of an open one, and a product that is free to modify and distribute without permission from the original creators.

Chinese AI Startup DeepSeek Makes Big Splash

Brian Jacobsen, the chief economist at Annex Wealth Management in Menomonee Falls, Wisconsin, explained the reasoning behind Wall Street’s selloff of Nvidia stock Monday morning.

“If it’s true that DeepSeek is the proverbial ‘better mousetrap,’ that could disrupt the entire AI narrative that has helped drive the markets over the last two years,” Jacobsen said.

“It could mean less demand for chips, less need for a massive build-out of power production to fuel the models, and less need for large-scale data centers,” he added. “However, it could also mean that AI becomes more accessible and help kickstart the development of a wide array of useful applications.”

Nvidia surpassed Microsoft as the world’s as the world’s biggest company by market cap in June last year.