Why Is Nvidia (NVDA) Stock Down So Much Today?

Nvidia (NASDAQ:NVDA) stock has been getting crushed today and has plunged over 17.4% in Monday trading. This is the biggest single-day drop for NVDA since the tech selloff began in August. Why? DeepSeek.

The DeepSeek Disruption

The selloff is mainly due to the Chinese AI startup DeepSeek releasing a new AI model called R1. It is open source and outperforms some of the most advanced (and expensive) AI models at a fraction of their cost. Wall Street is worried that this AI model could wipe out OpenAI’s moat and completely destroy the demand for GPUs in the long run.

DeepSeek R1 is open source, so it is possible for other companies to learn and copy from this startup. This may seem like a good thing for the end user but for the companies selling GPUs and flaunting big numbers to capture investments from venture capitalists, it could become a nightmare. If all it takes for such a powerful model is (rumored to be) just $12 million in training, AI models are going to be commoditized significantly, and in a way that would make it impossible for capital-intensive AI startups like OpenAI and Anthropic to generate profits.

Why This Matters for Nvidia

As DeepSeek-R1 requires much less power to run, it can run just fine on very few GPUs. If other companies try to copy this efficiency, Nvidia’s AI GPU demand could fall off a cliff. Nvidia has made a fortune selling its A100 and H100 chips to tech giants who need massive computing power for their AI systems. The stock delivered 180% in 2024 gains thanks to this demand. However, they might not need all that hardware since R1 was trained using older and cheaper H800 GPUs with great results.

What Wall Street Is Saying

Wall Street analysts still haven’t reached a consensus about what is going on. It is too early to tell, but Jefferies thinks this could lead companies to “refocus on efficiency and ROI.” This means companies could start focusing less on computing power starting in 2026. Citi thinks Nvidia can still perform.

The Bottom Line

The timing is terrible for Nvidia. The company was about to roll out its Blackwell series chips (already sold out). This was supposed to be a long-term cash cow for this company, but it might not be after all if everyone starts shifting to cheaper GPUs and Nvidia loses its pricing power.

The big question is whether this is just a temporary panic or the start of a bigger shift in how companies approach AI development. For now, though, Nvidia shareholders are feeling some serious pain.

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