Investing

Nasdaq Tumbles: NVIDIA, Broadcom and Microsoft Pull the Market Down

Omor Ibne Ehsan

Published: January 27, 2025 4:22 pm

The Nasdaq is currently experiencing a significant pullback. It is currently down 3.5% and has gone below the 20,000 level to the 19,250 range. Many are calling this downturn a “black swan event” for tech stocks.

This downturn is mainly due to concerns over a Chinese AI startup called DeepSeek. The startup released its DeepSeek-R1 AI model exactly one week ago. It didn’t stir up much news last week, but as more and more developers and users discovered it and flocked to it, it is now gaining significant traction. DeepSeek is now more popular than ChatGPT in the App Store.

In fact, R1’s previous iteration, DeepSeek-V3 — released just 25 days before it — cost just $5.6 million to train. This is a remarkably low figure compared to the hundreds of millions that AI startups have spent making models that are being proven much inferior now.

It has stirred up an enormous amount of bearish sentiment across the tech sector, and Nvidia (NASDAQ: NVDA), Broadcom (NASDAQ: AVGO), and Microsoft (NASDAQ: MSFT) are now among the biggest losers.

24/7 Wall St. Key Points:

• Wall Street is spooked by DeepSeek-R1.

• The three aforementioned companies have been dealt the biggest blows by the bears.

• If you’re looking for some stocks with huge potential, make sure to grab a free copy of our brand-new “The Next NVIDIA” report. It features a software stock with 10X potential.

Why Nvidia, Broadcom and Microsoft Are Pulling the Market Down

NVDA stock is currently down over 17.3%. This is due to fears that highly efficient models like DeepSeek-R1 could cause the demand for GPUs to tumble. In turn, this will cut into Nvidia’s sales figures, as Nvidia’s sales growth has been highly dependent on AI.

AVGO stock is doing even worse than NVDA: down 19.3% so far. This is due to the same reasons Nvidia is facing a downturn. Broadcom’s sales have been increasingly linked to AI, so the demand for Broadcom’s AI chip components could diminish fast as the DeepSeek breakthrough causes the landscape to change.

Investors were very bullish on Microsoft, even last week. This was because Microsoft has its own AI infrastructure project going, with a clip of Satya Nadella saying “I’m good for my $80 billion” going viral. Sadly (for AI-related companies, at least), DeepSeek’s breakthrough has shattered whatever enthusiasm Stargate brought. 

Instead, investors are no longer confident that all the AI infrastructure is even necessary since DeepSeek is extremely efficient.

The Bottom Line

Keep your eyes peeled since these stocks could also lead the recovery. Many argue that while DeepSeek can certainly hurt these companies, it can also bring about some change. Perhaps AI companies could learn from DeepSeek and use their hardware advantage to scale even more and train an extraordinary AI model.

For now, though, a lot needs to be re-assessed in the AI sector.