US stocks experienced a significant decline on Monday, with more than $1 trillion in market capitalization wiped out as traders sold off technology stocks in response to fears over a new artificial intelligence app from a Chinese startup.
The S&P 500 dropped nearly 1.5%, while the Nasdaq Composite lost over 3% by the close of trading.
The hardest-hit sector was semiconductor companies, with Nvidia seeing a dramatic 17% plunge in its stock price. This marked the largest single-day loss in market cap history, erasing $589 billion from Nvidia’s valuation.
As a result, the chip maker lost its position as the world’s most valuable company, with Apple’s market cap rising 3% to $3.45 trillion, surpassing Nvidia’s $2.9 trillion.
Other chip manufacturers, including Broadcom and Taiwan Semiconductor Manufacturing Company, also saw sharp declines, falling 17% and 13%, respectively.
The selloff was triggered by concerns over DeepSeek, a new AI application from a Chinese startup, which was said to outperform OpenAI’s ChatGPT in several benchmarks.
The app surged in popularity, becoming the most downloaded app on Apple's App Store in the US on Monday, further fueling investor anxiety.
Shares of Oracle, which had seen a rally last week following President Trump’s announcement of a $500 billion deal with the company to expand AI infrastructure, also fell nearly 14%. SoftBank, which was part of the deal, dropped 8% in Tokyo trading.
Analysts are paying close attention to developments in China’s AI advancements. Angelo Zino, senior equity analyst at CFRA Research, cautioned that the emergence of DeepSeek might lead to a reassessment of AI spending and technology upgrades, particularly by US companies. "Commentary from US hyperscalers this week will be key to understanding their stance on continued AI investment," he noted.
The Dow Jones Industrial Average saw a modest gain of 0.65%, closing at 44,713.58, while the Nasdaq Composite ended the day 3.07% lower.
Other major tech stocks in the “Magnificent Seven” also posted losses, including Microsoft, which fell 2%, and Alphabet, which lost 4%.
David Bahnsen, Chief Investment Officer at The Bahnsen Group, warned that US efforts to limit China’s access to American technology, particularly chips, could lead China to become more self-sufficient and potentially the top competitor in the global tech industry.
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