Tech stocks around the world took a big hit on Monday. The futures for the Nasdaq, a stock market for tech companies, fell by 4.3%, and the S&P 500 dropped by 2.4%. One main reason for this drop was a sharp decline in Nvidia’s stock prices, which went down by up to 7%. Nvidia has been a major player in the AI world, but a new low-cost AI model from a Chinese company named DeepSeek is causing panic. This model could make it harder for companies like Nvidia and other big tech firms to make money, which raises concerns over their high costs.
Shares of well-known companies like Tesla, Amazon, and Meta also dropped by more than 2% as investors worried about the future. Nvidia has enjoyed great success with a 196% increase in its stock in 2024, but now it faces competition from DeepSeek, which offers a cheaper and simpler AI solution.
European markets were affected too, with the overall STOXX 600 index down by 0.7% and tech companies falling by 4.5%. In Asia, companies like Advantest, which sells parts to Nvidia, lost 8.5%, and Tokyo Electron lost 5%. In India, tech stocks also fell significantly, including a 3.3% drop in the Nifty IT index. Netweb Technologies, an Indian AI company partnered with Nvidia, saw its shares drop by 13% due to fears surrounding DeepSeek’s technology.
DeepSeek’s AI model can run on cheaper Nvidia chips and is much less expensive to train, costing less than $6 million. This is in contrast to major AI firms, which spend a lot of money on their systems, leading to worries about reduced profits and less demand for expensive chips.
Overall, the panic spread through Asia, with companies like YTL Power in Malaysia falling 7% and the CSI300 AI index in China dropping 2.2%. European tech companies were also hit hard, with ASML falling by 8.7% and Siemens Energy sinking by 17.7%.
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