Nvidia Corporation (NASDAQ:NVDA) suffered a dramatic selloff, losing over 16% of its value in a single day after the rapid rise of Chinese AI app DeepSeek. The unexpected success of DeepSeek-V3, developed at a fraction of the cost of competitors, has raised concerns over AI infrastructure spending and US market dominance.

Key Market Reactions

• Nvidia Stock Plunge: NVDA tumbled over 16%, marking one of its worst single-day performances in recent years.
• Broader AI Selloff: Other chipmakers, including Broadcom Inc (NASDAQ:AVGO) and Advanced Micro Devices Inc (NASDAQ:AMD), also saw sharp declines.
• US AI Investment in Question: OpenAI and other firms recently announced a $500B investment in AI infrastructure, now under scrutiny given DeepSeek's efficiency gains.

DeepSeek's Competitive Threat

DeepSeek's AI chatbot became the most downloaded free app in the US, with a development cost of just $6 million, compared to the billions spent by rivals like OpenAI. This has triggered questions about capital efficiency in AI model development and whether US hyperscalers may need to reassess their spending strategies.

How NVDA Stock Performs After a 9%+ Drop

Analyzing historical price movements since 2022, data from Bloomberg and Investing.com suggests:

• Short-Term Volatility: Initial sharp declines are often followed by uncertain trading sessions.
• Medium-Term Stabilization: Out of seven instances of a 9%+ drop, Nvidia has historically shown a tendency to recover, outperforming the S&P 500 (SPY) over the following weeks.

Investor Takeaways

• Monitor Analyst Revisions: Track the latest Nvidia price target updates using the Price Target Summary API to see whether Wall Street firms adjust their expectations.
• Watch AI Sector Trends: The Sector Historical API can help assess how AI stocks are reacting compared to broader market movements.

Final Thoughts

While DeepSeek's rise raises legitimate concerns about AI efficiency and capital allocation, Nvidia's long-term AI leadership remains a key question for investors.