NVDA
📉 The video outlines a hypothetical scenario where Nvidia experienced a record 17% single-day stock drop on January 27, 2025, losing $590 billion in market cap.
🤖 This potential crash is attributed to the emergence of a highly efficient and low-cost AI model (R1) from startup DeepSeek, challenging the necessity of Nvidia’s advanced processors.
⚠️ Investors hypothetically re-evaluated Nvidia’s future sales potential due to the R1 model demonstrating comparable AI performance with fewer, less sophisticated resources, triggering a massive sell-off.
@CobasAssetManagement:
“On January 27, 2025, the tech giant Nvidia protagonized the biggest stock market crash in history. In this video, we tell you about this record debacle, its reasons, and how investors can protect themselves against these types of unexpected falls in the financial markets. January 27, 2025, was a black Monday for Nvidia. Its shares fell almost 17%, and it lost about $590 billion in market capitalization. It was by far the largest loss of value for a company in a single day to date. It was a negative day for the entire market. The Nasdaq index, composed of tech companies, fell more than 3%. The S&P 500 index, which includes the 500 largest companies in the United States including Nvidia, fell 1.5%. Why did this happen? The main reason behind Nvidia’s fall was a new artificial intelligence model that burst onto the market at the end of January 2025. It’s called R1 and is a development by the Chinese startup DeepSeek. The performance of DeepSeek’s R1 model is comparable to that of ChatGPT’s O1 model, one of OpenAI’s most advanced artificial intelligence models. But the R1 has two important differences. The first is that the cost of its training was ridiculously low. It lasted barely 2 months and cost less than $6 million. To put this in perspective, OpenAI invested $100 million to develop the GPT-4 model of ChatGPT. Furthermore, DeepSeek used less sophisticated chips than Nvidia’s to achieve these results, as the US government has restricted the export of artificial intelligence chips to China. The second difference is that the model’s operating cost is much lower than ChatGPT’s O1, specifically more than 90% lower. These two differences make the R1 model a major disruption in the artificial intelligence market. Nvidia is the main manufacturer of processing units for the sector. Major market players like OpenAI, Google, and Meta use Nvidia’s processors. The R1 model showed that it is possible to achieve similar performance using many fewer resources, especially less energy and fewer processors. With this information, investors re-evaluated Nvidia’s market value. If Nvidia’s processors are not as important for the artificial intelligence industry, perhaps its future sales will be lower than expected, and therefore the company’s value will be lower. This reasoning caused a massive sell-off of shares that generated the 17% drop in its price. Nvidia is not the only one affected by all this. Large US tech companies like Google and Meta have invested hundreds of billions of dollars in developing their artificial intelligence models. DeepSeek’s work seems to demonstrate that these developments can be carried out at a much lower cost. The emergence of DeepSeek’s R1 model changes the future expectations for artificial intelligence. Let’s look at its possible consequences beyond the damage done to Nvidia. Competition among processor manufacturers for artificial intelligence could grow strongly. DeepSeek achieved a model comparable to ChatGPT’s with less sophisticated and much cheaper processors. This may encourage more manufacturers of cheap processors to emerge, multiplying options and further harming Nvidia and some important competitors like Intel and AMD.”
Watch the exact part of the video where @CobasAssetManagement talks about Nvidia here:
Watch the video on YouTube
Read more articles analyzing Nvidia (NVDA) at the provided link. NVDA stock.
