NEW YORK: In a shocking turn of events for the tech industry, US chip-making giant Nvidia saw its market value plummet by nearly $600 billion on Monday, January 27, following the rise of a competitively priced generative AI model from Chinese startup, DeepSeek. This new development has sent shockwaves throughout Wall Street and raised critical questions about American dominance in the rapidly evolving AI sector.

Emerging from Hangzhou, DeepSeek’s chatbot has reportedly demonstrated capabilities on par with leading US AI technologies, achieved with a modest development budget of just $5.6 million. In stark contrast, American tech giants have invested billions into their AI technologies. The success of DeepSeek's application on Apple's US App Store, where it quickly became the top-rated free app, casts a spotlight on the shifting dynamics of the industry.

Nvidia's shares tumbled nearly 17%, marking the deepest single-day loss for a company in Wall Street's history, as reflected in LSEG data, erasing $589 billion in stock value. This unprecedented decline more than doubles the previous record loss set by Nvidia itself last September.

Kathleen Brooks, research director at trading platform XTB, pointed out that “US tech dominance is being challenged by China.” With the spotlight firmly on whether China can outperform the US in AI—faster and more cost-effectively—the race to dominate this critical arena is heating up.

Art Hogan, chief market strategist at B. Riley Wealth, described the market's frenzied reaction as “shoot first, ask questions later,” as investors grapple with the legitimacy of DeepSeek's claims. The immediate uncertainty surrounding the startup has resulted in a wave of skepticism, with tech investors urgently seeking clarity on the potential implications for the industry.

Amidst this turmoil, DeepSeek has temporarily halted new user registrations due to reported “large-scale malicious” cyberattacks targeting its platform. This development only adds to the tension as the market awaits earnings reports from tech behemoths like Meta and Microsoft, who are likely to address the challenge posed by the rising Chinese firm.

Other American chip-makers felt the repercussions as well, with shares in Broadcom plummeting 17.4%, while Dutch semiconductor manufacturing company ASML experienced a 6.7% drop. Significant energy player Constellation Energy, which is in the process of ramping up AI infrastructure, saw shares dive more than 20%.

On the broader financial landscape, Wall Street’s S&P 500 index decreased by 1.5%, although the Dow managed a slight gain of 0.7%. European stock markets mirrored this volatility, with key exchanges in Frankfurt and Paris finishing in the red, while Asian markets predominantly showcased declines.

In a related note, last week’s inauguration of Trump saw a monumental announcement of a $500 billion initiative to bolster AI infrastructure in the US, in partnership with Japanese powerhouse SoftBank and OpenAI, creators of ChatGPT. However, this development was overshadowed on Monday as SoftBank’s stock fell over 8% in Tokyo, alongside similar declines for other semiconductor firms, such as Advantest and Tokyo Electron.

As the battle for AI supremacy heats up, investors and companies alike will need to stay vigilant and informed about these disruptive market shifts. The future of technology as we know it may depend on how swiftly firms adapt to the challenges presented by innovative competition like DeepSeek.