DeepSeek, a Chinese artificial intelligence (AI) startup, has recently made significant waves in the tech industry and stock markets. The company unveiled an AI model that rivals established platforms like OpenAI’s ChatGPT and Meta’s Llama 3.1. Notably, DeepSeek claims to have developed this model at a fraction of the typical cost, utilizing reduced-capability chips from Nvidia.

This development has had a profound impact on the stock market, particularly on Nvidia’s stock. On Monday, Nvidia’s shares plummeted by 17%, resulting in a loss of nearly $600 billion in market value—the largest single-day loss for any company on record.

This decline was driven by investor concerns that DeepSeek’s cost-effective AI model could threaten Nvidia’s dominance in the AI sector.

However, the market reaction was not solely negative. Following the initial sell-off, Nvidia’s stock rebounded by 9% on Tuesday, indicating a partial recovery as investors reassessed the situation.

Analysts suggest that while DeepSeek’s advancements present new competition, they could also lead to increased overall demand for AI technologies, potentially benefiting companies like Nvidia in the long run.

In summary, DeepSeek’s emergence has introduced both challenges and opportunities in the AI landscape. While it has prompted immediate market volatility, particularly affecting Nvidia’s stock, it also underscores the dynamic and rapidly evolving nature of the AI industry.