Nvidia shares made a strong comeback after suffering a historic £500bn market value loss, as former US President Donald Trump warned that China’s rising artificial intelligence (AI) industry poses a serious threat to American technological dominance.
Following a devastating 17% drop on Monday—the largest single-day stock loss in corporate history—Nvidia’s stock rebounded nearly 9%. This recovery has provided much-needed relief to investors, particularly those in the UK with direct stakes in Nvidia through stock ownership, pensions, and other investment portfolios.
Chinese AI Start-Up DeepSeek Disrupts Market and Challenges US Leadership
The steep sell-off was triggered by growing concerns over competition from DeepSeek, an emerging Chinese AI powerhouse whose rapid growth has sent shockwaves through Silicon Valley and Wall Street. The company’s free AI chatbot, developed for just £4.8 million, has raised serious questions about the immense financial investments being funneled into AI development by US tech giants.
DeepSeek’s AI chatbot has surged in popularity, even surpassing OpenAI’s ChatGPT to become the most downloaded chatbot on the Apple App Store. This meteoric rise has intensified fears that Western tech firms could fall behind in the AI race while also raising skepticism about the inflated valuations of US technology stocks.
Trump Calls DeepSeek AI a “Wake-Up Call” for US Tech
In response to DeepSeek’s success, Trump stated: “The release of DeepSeek AI from a Chinese company should be a wake-up call for our industries that we need to be laser-focused on competing to win.” However, he also acknowledged the potential benefits of cost-effective AI advancements, saying, “If you could do it cheaper, if you could do it for less and get to the same end result, I think that’s a good thing for us.”
OpenAI CEO Sam Altman echoed a similar perspective, describing DeepSeek’s AI model as ‘impressive’ given its low-cost development. He reassured that OpenAI remains committed to delivering superior AI models, despite new competition in the field.
AI Market Frenzy Sparks Fears of a Tech Bubble
Despite Nvidia’s rebound, financial analysts warn that the AI-driven stock rally may be forming a speculative bubble similar to the late 1990s dot-com boom. Billionaire investor Ray Dalio, founder of Bridgewater Associates, cautioned that the combination of soaring stock prices and rising interest rates could “prick the bubble.”
“Where we are in the cycle right now is very similar to 1998 or 1999,” Dalio explained. “There’s no doubt AI will change the world, but investors need to distinguish between industry success and investment success.”
DeepSeek’s Rise Raises Concerns Over Data Privacy and US-China AI Restrictions
DeepSeek’s rapid ascent has also raised alarms about data security and potential censorship by the Chinese government. Australia’s Science Minister Ed Husic has urged caution, stating that pressing questions about the chatbot’s privacy policies and data management practices must be addressed.
Moreover, the emergence of a competitive Chinese AI chatbot has cast doubt on whether US efforts to restrict China’s access to advanced AI technology and semiconductor chips have been effective. Despite regulatory actions by both Trump and President Joe Biden, DeepSeek’s breakthrough suggests these measures may not have achieved their intended goals.
Will Nvidia Sustain Its Market Comeback?
Richard Hunter, Head of Markets at Interactive Investor, acknowledged the competitive threat posed by DeepSeek, stating: “The DeepSeek threat has certainly ruffled feathers. Even if this storm subsides, other challenges to US AI dominance could emerge. Long-term investors will likely monitor developments rather than rushing for the exit.”
As Nvidia attempts to stabilize, industry leaders and investors will be closely watching how the global AI landscape evolves. With mounting pressure from Chinese tech innovation, the battle for AI supremacy is far from over. The next few months could prove critical in determining whether US technology firms maintain their lead or face a significant shift in the balance of power.
