Nvidia, which rose to prominence in the stock market by providing the computer chips driving the global artificial intelligence boom, faced a harsh reality from a small Chinese firm that demonstrated the ability to achieve more with fewer Nvidia products. On Monday, Nvidia’s shares plummeted 17 percent after DeepSeek revealed it could train a state-of-the-art A. I. system using only a fraction of the Nvidia chips previously utilized by OpenAI, the creator of ChatGPT. This decline resulted in a loss of about $600 billion in market value, marking Nvidia’s worst trading day since the market downturn in March 2020. DeepSeek’s announcement challenged the prevailing belief in the tech industry that to develop larger and more powerful A. I. systems, it would require massive investments in new data centers, which would be reliant on one essential element: a substantial supply of Nvidia’s chips. According to various estimates, the Silicon Valley giant controls 90 percent of the market for specialized chips necessary for constructing A. I. systems. Since OpenAI launched ChatGPT in late 2022, Nvidia’s stock has surged. Over the last two calendar years, the company's revenue has skyrocketed more than 200 percent to $126 billion, and its overall market value has soared by 700 percent, peaking at $3. 62 trillion in November. However, DeepSeek’s breakthrough suggests that the demand for Nvidia’s chips may not be as boundless as previously thought.

Although Nvidia remains in a strong position with little competition for its A. I. chips, its client companies may begin to cut back on their spending. “Previously, the mindset was that A. I. could only grow by being bigger and faster. Larger chips would mean greater A. I. capabilities, ” explained Patrick Moorhead, CEO of Moor Insights & Strategy, a tech and semiconductor research firm. “But this rapid development raises questions about the sustainability of that belief for Nvidia and whether the future demand for its chips will be as high. ”