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Investing.com -- Shares of NVIDIA (NASDAQ:NVDA) fell by 12% in premarket Monday trade as the market reacted to emerging competitive threats in the artificial intelligence (AI) sector.
A Chinese startup, DeepSeek, has introduced a new open-source large-language model, which it claims was developed in just two months for less than $6 million. This announcement has raised concerns about the efficiency of U.S. tech firms' investments in AI technology and data centers, leading to a broader sell-off in the technology sector.
The market's response reflects anxiety over America's position as a leader in AI, as DeepSeek's entry into the market may signify a shift in the competitive landscape. The startup's cost-effective development of its AI model contrasts sharply with the substantial funds that larger tech companies like NVIDIA have been pouring into similar technologies.
Traders are now contemplating whether this pullback in Nvidia stock is overdone.
"It is set to open below range support near $130, putting next support at the rising 200-day MA (~$122). We think the correction could extend to the weekly cloud, near $110, noting intermediate-term oversold territory is still well below," Fairlead Strategies analyst Katie Stockton wrote in a note.
This sentiment reflects the broader skepticism that has taken hold of the market, as investors reassess the value and future potential of NVIDIA's AI investments in light of the new competition.
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