DeepSeek Shakes the AI Market – Nvidia in Historic Plunge

Nearly a decade ago, in May 2015, China’s then-Premier Li Keqiang introduced an ambitious initiative to secure China’s position as a global leader in ten high-tech industries. The “Made in China 2025” project aimed to reduce the country’s reliance on foreign technology and achieve at least 70% self-sufficiency within the sector.

Since its inception, this initiative has evolved into a race between superpowers China and the U.S., fueled by increased trade tariffs and espionage allegations from both the Trump and Biden administrations.

As we step into 2025, has the initiative succeeded? Despite U.S. efforts to curb China’s advancements, the answer is a resounding yes.

“Any analysis of People’s Republic of China’s competitiveness across these 10 areas has to acknowledge that China is either a global leader or close follower in almost all of them,” said Lindsay Gorman, managing director of the German Marshall Fund’s technology program in Washington.

The success is particularly evident in the latest developments surrounding the Chinese AI company DeepSeek, which has dominated headlines this week and rattled U.S. tech giants like Microsoft and Nvidia—the latter experiencing the worst drop in Wall Street history on Monday.

The developers behind the DeepSeek chatbot, considered equivalent to OpenAI’s ChatGPT, claim the model was developed in just two months at a cost of under six million dollars—significantly faster and cheaper than its competitors.

While scepticism remains regarding the accuracy of these figures, along with accusations that DeepSeek may have used OpenAI’s models to train its own AI, this development must be seen as revolutionary for the future of AI innovation.

Market Reactions and Geopolitical Implications

President Donald Trump commented that this week’s events should be a “wake-up call” for the U.S., stating, “We need to be laser-focused on competing to win,” Mr Trump said.

But it wasn’t just Nvidia and OpenAI CEO Sam Altman who faced a harsh reality check—other markets were also affected. On Monday, stock markets declined due to pessimism surrounding DeepSeek’s impact on U.S. tech companies, while electricity companies such as Constellation, Vistra, and NRG suffered heavy sell-offs.

The news also impacted global commodity markets. Energy resources and electrically conductive metals fell, with oil and nickel (a key component in batteries) losing value. Copper, essential for electrical transmission in data centres, saw a particularly sharp decline.

Copper wiring plays a crucial role in both the green transition and AI infrastructure. Given that mining projects are expensive and time-consuming, supply has remained constrained. Historically, this has led to high prices, strong short-term returns, and sustained long-term demand.

Recovery – But Risks Remain

By Wednesday, Nvidia had staged a strong recovery. Positive quarterly results from Dutch semiconductor equipment maker ASML also boosted semiconductor stocks across Asia and Europe. Futures markets signalled continued gains in the U.S., with Nasdaq and S&P 500 futures rising 0.4% and 0.1%, respectively.

Despite these gains, analysts now caution that the rebound has not entirely erased Monday’s sharp losses.

“There’s not been a rebound like ‘oh, it was nothing’. It is just a reflection that Monday’s move was a tad overdone,” said Mitul Kotecha, Head of FX and Macro Strategy for Emerging Markets at Barclays.

The AI race between China and the U.S. appears to be just beginning, and the market is now anxiously awaiting the next move.