On the morning of January 27th, 2025, a Chinese hedge fund company called High-Flyer released their new AI model called DeepSeek. This was a new model that competed with OpenAI, the creator of Chat GPT, Model o1. The only difference between the two is that OpenAI spent billions of dollars and costs the company 200 dollars a month to operate; Deepseek is free and uses less than six million dollars to develop.
Following this revelation, the stock shares of NVIDIA, a chip supplier for OpenAI, plummeted by over 17%. This fall alone caused an almost 500 billion dollar loss in the stock market. The largest single loss before this was less than 300 billion dollars.
(Image from CNN Business)
This was the most significant drop in the stock market’s Market cap (the value of all publicly available stocks) in a long time. The New York Times called this fiasco a “Bloodbath.”
Even if you didn’t directly invest in NVIDIA, their decline likely affected your investments, such as Index funds. Index funds spread the risk of traditional stocks by investing in multiple stocks at a time. A great example of this is the S&P 500, which invests in the top 500 stocks in America. When Nvidia dropped, the S&P 500 fell nearly an entire percent. This may not seem like a significant number, but the Market cap of the S&P is well over 50 trillion dollars.
However, NVIDIA wasn’t the only loser in Deepseek’s creation. Other tech giants such as Meta, Microsoft, and AMD also suffered losses, though not to the extent of NVIDIA.
In conclusion, this is a prime example of the liquidity of the Stock market. It is impossible to predict what will happen tomorrow. Prices may crash or shoot up at any given point, and us civilians are at the mercy of the companies.
