How DeepSeek Challenged NVIDIA’s AI Monopoly

January ended with an unprecedented event in the financial markets. On Monday, January 27, the Chinese AI startup DeepSeek shook the industry with the launch of its latest model, denting Nvidia’s dominance and triggering the largest single-day market cap loss in Wall Street history — a staggering $589 billion wiped out in just one day.

To put this into perspective, Nvidia’s loss equalled the entire market capitalization of giants like Oracle, Exxon, and Netflix. But the impact didn’t stop there — the sell-off rippled through the market, affecting cryptocurrencies, stock indices, and bonds.

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Why Did DeepSeek Trigger a Market Earthquake?

DeepSeek, a startup born from the remnants of a Chinese investment fund, promises to revolutionize the AI industry for three key reasons:

It runs on low-end Nvidia chips, significantly reducing hardware costs.
It is developed at a fraction of the cost compared to competitors, making AI more accessible.
It is fully open-source, challenging the proprietary business model of major tech firms.

If these claims prove to be true, two fundamental pillars of the AI market — and the massive profit margins of Nvidia and power utility companies — could collapse.

The Cost of Energy for AI

Companies investing in artificial intelligence face enormous energy costs. The market’s reaction confirms this — on January 27, Vistra Corp, a leading electric utility company, suffered significant losses before quickly rebounding, highlighting how the entire energy supply sector could be vulnerable to similar disruptions in the future.

NVIDIA’s Technological Monopoly

Nvidia dominates the AI chip market with such a technological advantage that companies have little choice but to buy its products. If DeepSeek succeeds in making an AI model sustainable with low-end and open-source chips, demand for premium hardware could decline sharply, putting pressure on Nvidia stock valuation and those of its competitors.

A Turning Point for AI and the Markets?

This could be a defining moment. If DeepSeek’s model gains traction, AI companies may face downward adjustments in their valuations, while sector growth expectations could prove overly optimistic. However, those who called it a “bubble burst” during Monday’s sell-off were too quick to judge — within days, the market had recovered its losses.

Bubble or not, one thing is certain: a stock market so concentrated and dependent on a few interconnected giants poses a clear systemic risk. Time will tell whether the “DeepSeek case” is a historical anomaly or the beginning of true disruption — one that, while painful for investors, could ultimately benefit the AI industry and end consumers.

David Prior

David Prior is the editor of Today News, responsible for the overall editorial strategy. He is an NCTJ-qualified journalist with over 20 years’ experience, and is also editor of the award-winning hyperlocal news title Altrincham Today. His LinkedIn profile is here.