DeepSeek’s AI Disruption: Which Sectors Took the Biggest Hit?
The launch of DeepSeek’s R1 AI model has triggered a panic sell-off in US tech stocks, with its open-source framework and cost-efficient architecture disrupting assumptions about AI infrastructure demands. A lot of stocks saw their prices crash in various sectors related to AI and AI infrastructure during Monday’s trading session, following a weekend full of speculations about DeepSeek’s impact. Some stocks began to recover from their sell-offs in the following days, while others continued to decline. In this article, I will review which stocks were most impacted by DeepSeek’s news.
Semiconductor Sector
The semiconductor sector was hit particularly hard. Nvidia ($NVDA), a leading AI chip maker, saw its stock price fall by approximately 17%, losing nearly $600 billion in market value—the biggest one-day drop in the company’s history. DeepSeek’s claim that their model can match competitors’ performance at much lower costs raised concerns about future chip demand. Other semiconductor companies also suffered significant losses: Taiwan Semiconductor ($TSM) fell 13% due to its role in chip production, while Marvell Technology ($MRVL) and Arista Networks ($ANET) dropped 19% and 22%, respectively. Broadcom ($AVGO) ended Monday down 17.40%.
The impact on Intel ($INTC) and AMD ($AMD) was limited because both companies have more diversified revenue streams and less exposure to the AI chip market compared to Nvidia. Intel stock fell only 2.5% on Monday, while AMD dropped 6.4%.
The semiconductor sector’s huge single-day loss reflects investor skepticism about “compute-at-all-costs” AI strategies.
Data Center and Cloud Infrastructure
Data center and cloud infrastructure companies were also severely impacted by DeepSeek’s announcement. The model reportedly achieves much lower training costs compared to other AI models, raising concerns that future AI systems may not require as much computing power or infrastructure as previously anticipated. This market shift affected the entire sector:
- Vertiv ($VRT), which manufactures cooling systems for data centers, saw its stock drop 28.5% as investors worried about reduced demand for its products.
- Super Micro Computer ($SMCI), a manufacturer of high-performance server solutions, dropped 10%.
- Oracle ($ORCL), a major provider of cloud computing and database services, fell 14%.
- Hewlett Packard Enterprise ($HPE), which provides enterprise IT infrastructure solutions, also experienced a significant decline, with its stock crashing 5.8% on Monday.
- Dell Technologies ($DELL), a key player in server manufacturing and data center hardware, saw a sharp decline of 8.7%.
The ripple effect was felt throughout the sector, as the potential for reduced infrastructure needs threatened the growth outlook for these companies.
Power Utilities
Power utility stocks suffered significant losses on Monday as DeepSeek’s energy-efficient AI model triggered a market reassessment of projected electricity demand. Companies like Vistra ($VST), Constellation Energy ($CEG), Public Service Enterprise ($PEG), Quanta Services ($PWR), and Talen Energy ($TLN) saw declines of 20–30%, reflecting investor fears that AI-driven power consumption growth might fall short of earlier estimates.
Nuclear Energy
In a similar trend, small modular reactor (SMR) stocks also saw significant price declines following the DeepSeek news. Prior to the announcement, SMR stocks had surged on the belief that AI data centers would require large amounts of reliable, carbon-free energy. For example:
- NuScale’s shares soared over 800% in 2024, fueled by speculation that tech giants like Microsoft and Amazon would use SMRs to power AI infrastructure.
- Oklo gained 271% amid similar optimism about potential data center partnerships.
However, much like other energy stocks, SMR nuclear stocks ended the day with losses of 20-30%. Companies like BWX Technologies ($BWXT), NANO Nuclear Energy Inc. ($NNE), NuScale ($SMR), and Oklo ($OKLO) saw their stock prices take a hit.
Opinions on the impact of DeepSeek’s divergence are mixed, with some experts contending that the recent sell-off was unwarranted. As investors reevaluate the potential implications of DeepSeek’s breakthrough across various sectors, several stocks have begun to rebound following Monday’s decline.
Here is a breakdown of the stocks most impacted on Monday, categorized by their respective sectors, along with their price changes for the remainder of the week, as of market close on Thursday:
Will the US AI Strategy Change?
Some experts argue that DeepSeek’s announcement is unlikely to significantly alter the demand for chips or the infrastructure required to support this AI model. David Sacks, currently serving as the AI Czar under President Donald Trump, has emphasized the ongoing need for investment in AI infrastructure. He has defended Trump’s initiative to allocate billions to AI infrastructure, underscoring America’s potential to maintain leadership in this domain, particularly in the development of advanced chips. While Sacks acknowledges the efficiency improvements brought by DeepSeek, he maintains that U.S. companies should integrate these new methods while continuing to prioritize the expansion of large data centers, which remains a critical competitive advantage.
This article is for informational purposes only and is neither investment advice nor a solicitation to buy or sell securities. All investment involves inherent risks, including the total loss of principal, and past performance is not a guarantee of future results. Always conduct thorough research or consult with a financial expert before making any investment decisions. BBAE has no position in any investment mentioned.
