Markets were in turmoil after Chinese startup DeepSeek introduced a low-cost AI model over the weekend. DeepSeek is set to disrupt the AI industry, having developed the technology using a fraction of the resources used by competitors in the US. It is a direct challenge to rivals like OpenAI, Google and Meta, whose valuations now come under scrutiny. DeepSeek also reduces the usage of chips and energy. Investors are now keen on understanding what a justified valuation of chip manufacturers would be after accounting for a more efficient technology that is expected to curb demand for huge data centers that run on extremely expensive chips. DeepSeek has already gained popularity since its launch, occupying a top position in the Apple Store.
The NASDAQ is down almost 3%, with cumulative losses for the top 10 losers reaching $965 billion. Chipmakers lost the most value followed by big tech companies. Even firms supplying electricity have been reeling after this announcement. Big players like Meta and Microsoft are monitoring the development closely and are expected to bring changes to their software after DeepSeek’s foray into AI.
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For this article we have picked a list of 10 stocks that have witnessed the highest erosion in value due to the DeepSeek effect. With each stock we have mentioned the number of hedge fund investors. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10. Vertiv Holdings Co (NYSE:VRT)
Number of Hedge Fund Investors: 91
Vertiv Holdings Co (NYSE:VRT) is down 25% with a loss in market cap of $14 billion. It designs, manufactures, and services critical digital infrastructure technologies and life cycle services for data centers. With DeepSeek providing a low-cost alternative, VRT could witness a slump in demand if users prefer the Chinese option.
9. Marvell Technology Inc. (NASDAQ:MRVL)
Number of Hedge Fund Investors: 70
Marvell Technology Inc. (NASDAQ:MRVL), a provider of semiconductor solutions across data centers and network edges lost $17 billion or 15% of its market cap today.
8. Amazon.com Inc. (NASDAQ:AMZN)
Number of Hedge Fund Investors: 286
Amazon.com Inc. (NASDAQ:AMZN) felt the ripples of the broader market as it is down by almost 1%, leading to a loss in market cap of $18 billion.
7. Constellation Energy Corporation (NASDAQ:CEG)
Number of Hedge Fund Investors: 78
Constellation Energy Corporation (NASDAQ:CEG) is one of the top losers in the list, dropping by 18%, with an estimated erosion in value by $20 billion. The firm sells electricity and could face a slump in demand if AI models become energy-efficient like DeepSeek.
6. Oracle Corporation (NYSE:ORCL)
Number of Hedge Fund Investors: 91
Oracle Corporation (NYSE:ORCL) lost $40 billion in market share after the share was down 8%. The firm has been making heavy investments in developing data centers in a bid to compete with big players like Amazon, Microsoft and Google.
5. Alphabet Inc (NASDAQ:GOOG)
Number of Hedge Fund Investors: 202
Even as Alphabet Inc (NASDAQ:GOOG) remained resilient, the share price was down almost 2%, leading to a loss in value of $42 billion. DeepSeek will definitely compete directly with Gemini, GOOG’s generative AI chatbot.
4. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Investors: 279
Another tech giant in this list, Microsoft Corporation (NASDAQ:MSFT) is down by over 3% or $95 billion. MSFT has been relying on OpenAI to develop its AI capabilities. With DeepSeek creating a disruption in the industry, MSFT will have to rethink its strategy for AI adoption.
3. Taiwan Semiconductor Manufacturing (NYSE:TSM)
Number of Hedge Fund Investors: 158
Taiwan Semiconductor Manufacturing (NYSE:TSM) is down 12%, losing $130 billion in market value over fears of reduced demand as AI models become more efficient and less resource-intensive with DeepSeek. Investors are looking for a more reasonable valuation that is in tandem with the demand for chips.
2. Broadcom Inc. (NASDAQ:AVGO)
Number of Hedge Fund Investors: 128
Broadcom Inc. (NASDAQ:AVGO), a leading chip manufacturer witnessed the second-largest loss in value after the share price dropped by almost 13%. Investors lost $148 billion in this stock as chip stocks faced the highest impact from the latest development.
1. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Investors: 193
Topping the list is NVIDIA Corporation (NASDAQ:NVDA), facing a mammoth loss in value of $441 billion after a 13% drop in share price. While the market grapples with the impact of DeepSeek on chip manufacturers, even a fractional improvement in AI resource utilization could have a major impact on NVDA’s revenue.
While we acknowledge the potential of NVDA as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NVDA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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