Nvidia experienced a staggering market value loss of $593 billion as Chinese AI startup DeepSeek surged, marking the largest market capitalisation drop in history. US stock futures showed stability, the dollar edged higher, and Asian tech stocks took a hit on Tuesday, following a sharp selloff spurred by concerns over the United States' waning dominance in the thriving AI sector.
Chipmaker Nvidia plummeted 17% overnight, erasing nearly $593 billion in value, an unprecedented market collapse. “We’re witnessing the onset of a significant narrative shift that has captivated markets for nearly two years, making this a moment that’s difficult to dismiss,” remarked Brent Donnelly, president of trading and analytics firm Spectra Markets.
While Nvidia shares saw modest gains in after-hours trading, Nasdaq 100 futures edged up 0.1%, and S&P 500 futures remained mostly flat. Meanwhile, Nvidia supplier Advantest dropped 10% in Japan, compounding a weekly loss of nearly 19%. AI-focused SoftBank Group tumbled 5.5%, while data-center cable producer Furukawa Electric declined 8%. Over two days, SoftBank has shed 13%, and Furukawa is down 20%.
In Australia, data center property owners faced sharp declines. Taiwan and South Korea’s tech-heavy markets were closed for holidays. Nvidia’s plunge accounted for much of Monday’s 3% drop in the Nasdaq, with the selloff rippling from Tokyo to New York, hitting entities across the AI supply chain—spanning cable manufacturers, power utilities, and software companies.
The CBOE Volatility Index, commonly referred to as Wall Street's “fear gauge,” spiked. Safe-haven assets like government bonds, the Japanese yen, and the Swiss franc rallied. Yields on 10-year US Treasury bonds dipped 9.5 basis points, holding steady at 4.55% in Asian trading. Futures for federal funds indicated an additional 9 basis points of rate cuts by year-end. Even crude oil prices slid 2% due to concerns about dwindling energy demand.
Hangzhou-based DeepSeek, a relatively unknown AI startup, has unveiled a cost-effective AI assistant developed using cheaper chips and minimal data compared to US competitors. JP Morgan sector analyst Josh Meyers commented, “DeepSeek’s ability to deliver top-tier models on a shoestring budget raises questions about the need for the colossal investments made by firms like OpenAI, Google, and Anthropic. Their advanced models even run natively on devices like iPhones, which could undermine the case for billions spent on compute infrastructure.”
Broad-Based Risk Aversion
In the US, the S&P 500 fell 1.5%, with Broadcom tumbling 17.4% and the Philadelphia Semiconductor Index recording its steepest drop since March 2020, down 9.2%. Gold prices slid more than 1% as investors liquidated holdings to offset losses elsewhere.
Major tech firms also faltered. Alphabet, Google's parent company, dropped 4.2%, and Microsoft declined 2.1%, although both stabilized in after-hours trading. In Europe, the STOXX Europe 600 technology index sank over 3%, with chip equipment manufacturer ASML losing 7%.
Bitcoin, a bellwether for market risk appetite, dipped below $100,000 for the first time in a week before stabilizing around $101,700. The US dollar slid nearly 1% against the yen and 0.4% against the Swiss franc overnight but showed slight recovery early Tuesday, trading at 155.36 yen and modestly strengthening against other currencies, holding the euro at $1.0454.
Chinese markets remained closed for Lunar New Year celebrations, while trading in Hong Kong ended at midday. Both the US Federal Reserve and the European Central Bank are scheduled to announce interest rate decisions later this week.
With the input from indiatoday
