Monday was brutal in the market, and no company felt it more than Nvidia Corp., which saw its share price drop by nearly 17%, wiping out $589 billion from the company’s valuation. This selling frenzy was sparked by sudden fears that U.S. tech companies, which have dominated the global market, may soon be replaced by a Chinese AI startup, DeepSeek. DeepSeek revealed a low-cost method of developing AI technology, a technology that the market has been obsessing over.
The mighty AI chipmaker king, Nvidia, is now seen by investors as being under threat. The belief that Nvidia’s dominance would continue has been seriously challenged. Over the past couple of years, the current bull run has largely been fueled by the allure of the AI boom. With the potential threat from a small rival who claims to achieve what Nvidia does at a fraction of the cost it highlights how fragile the AI market is. This, in turn, raises questions about whether the market is overvalued and if we are approaching the time when this bubble may finally burst.
If the entire market goes into panic after just an announcement from a rival, the coming days could prove to be the real litmus test, with earnings season now in full swing. Starting on Wednesday, we will have earnings reports from Microsoft, Meta Platforms, and Tesla (a company for another article). On Thursday, we will hear from Apple. However, we will have to wait until the 26th of February to find out Nvidia’s earnings.
Even though we have to wait, the earnings reports from the other MAG-7 companies could show us what the market is expecting. Considering we are currently living through one of the longest bull runs in history, there are signs that the music might indeed be about to stop.
By James Trescothick
Head of Market Research and Market Analysis
