China's DeepSeek set off a $969 billion bomb of value by U.S. technology stocks in the S&P 500. And some worry the disruption is only beginning.
Unlike U.S. AI models that require costly computer chips and huge energy demands to "train" their engines, DeepSeek gets competitive results using a fraction of the power and cheaper chips. This is exactly the "good enough" kind of disruption in tech that rattles markets.
And it more than rattled markets this week. More than 70% of the 69 stocks in the Technology Select Sector SPDR ETF dropped on the news. And not by a little. Nvidia alone lost $596 billion in value, which is more than more than 485 S&P 500 stocks are individually worth.
"DeepSeek is a Chinese AI large-language model believed to be on par with some of the best models released by OpenAI and others, despite not having access to leading AI accelerators, such as Nvidia's best Hopper and Blackwell products," said Morningstar's Brian Colello.
Big Three U.S. AI Implosions
Nvidia's nearly $600 billion drop in value in one day is one for the history books. It's more than 200% larger than the No. 2 hit: a $194 billion loss at Broadcom.
The Nvidia value implosion mars what had been 2024's do-no-wrong stock. It sports a 92 RS Rating and is trying to form a cup base. Additionally, off-the-charts growth gives Nvidia an EPS Rating of 99. Nonetheless, the stock is down to 118.58 a share. Colello is still sticking with his fair value of 130 a share, though.
"We are maintaining our 130 per share fair value estimate for wide-moat Nvidia despite the sell-off in AI stocks," he said.
It's a similar story at Broadcom. The chipmaker's shares tanked nearly 18% to 202.13 on Monday. The stock, though, maintains a 95 RS Rating. And earnings are on pace to rise 31% in 2025.
Lastly, behind-the-scenes AI player Oracle plunged by nearly $77 billion in value. The company is trying to use ties with the Trump Administration to get bigger foothold in AI. But that dream may fizzle if AI leadership shifts to China.
It's Just One Day
It's important to note the AI freak-out is just one day at this point. U.S. AI models are still better at dealing with complex queries than DeepSeek.
But Kodak took comfort knowing traditional photo quality outmatched digital photos — before it was too late to catch up.
Biggest AI Market Value Losers
On Jan. 27 based on Technology Select Sector SPDR
| Company | Ticker | Market Value Lost ($ billions) |
|---|---|---|
| Nvidia | NVDA | -$596.7 |
| Broadcom | AVGO | -$194.9 |
| Oracle | ORCL | -$76.0 |
| Microsoft | MSFT | -$72.2 |
| Arista Networks | ANET | -$36.6 |
| Micron Technology | MU | -$14.1 |
| Advanced Micro Devices | AMD | -$13.0 |
| Cisco Systems | CSCO | -$13.0 |
| Amphenol | APH | -$11.2 |
| Applied Materials | AMAT | -$10.6 |
Sources: S&P Global Market Intelligence, IBD
Follow Matt Krantz on X (Twitter) @mattkrantz
