Why Nvidia Stock Lost 11% in January

Shares of Nvidia (NASDAQ: NVDA) suffered a double-digit decline in January, primarily due to the threat from Chinese artificial intelligence (AI) start-up DeepSeek.

AI stocks plunged on Jan. 27 as investors reacted to the new chatbot DeepSeek R1 and DeepSeek's 22-page research paper that explained the engineering and technology behind the low-cost, open-source AI model. Among other things, DeepSeek claimed that it cost just $5.5 million to train the model, a tiny fraction of the billions that Nvidia's customers have paid for the components that run AI chatbots like ChatGPT.

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According to data from S&P Global Market Intelligence, the stock finished the month down 11%. As you can see from the chart below, Nvidia was in the green for most of the month until the DeepSeek news sank the stock.

^SPX data by YCharts

What the DeepSeek news means for Nvidia

Nvidia stock dropped 17% on Monday, Jan. 27 in an unprecedented bloodbath in the AI sector. In fact, it was the worst single-day dollar-value loss for a single stock in history, as Nvidia gave up roughly $600 billion in market cap.

The stock initially recouped some of those losses, but as of Feb. 3, it was trading below its closing price on Jan. 27 in part due to fears around tariffs.

With the sell-off in Nvidia stock, investors are betting that DeepSeek's much cheaper architecture could dramatically change the economics across the industry, either causing demand for Nvidia's state-of-the-art components to fall or prices to crash as, according to that argument, there's no need to spend billions to do what DeepSeek could do for millions.

It's still too early to know what the long-term impact of DeepSeek is, and there is some debate over how much of an advance its technology is. OpenAI accused the company of "distilling" its model, essentially using it to train its own model, meaning its work wasn't original.

An Nvidia spokesperson did give DeepSeek credit for the achievement, calling it "an excellent AI advancement."

Image source: Getty Images.

Is Nvidia a buy?

Some analysts are skeptical that DeepSeek will significantly alter demand for Nvidia's chips or the current path in AI, noting that most American companies won't want to give their data to a Chinese start-up.

However, the model is already being embraced in some corners. It's now available on Microsoft Azure, and Meta Platforms is seeking to apply DeepSeek's advances to its own AI models.

At this point, it's too early to say what the long-term impact from DeepSeek is, but Nvidia is a resilient and adaptable company, and it can adjust to maintain its leadership in AI chips.

Additionally, DeepSeek could accelerate demand for AI by making the technology cheaper. Overall, it's a mistake to write off Nvidia here, and the chip titan could be a beneficiary from the DeepSeek disruption in the long run.

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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Jeremy Bowman has positions in Meta Platforms and Nvidia. The Motley Fool has positions in and recommends Meta Platforms, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.