Nvidia's shares plummeted approximately 17% on Monday, marking its most significant single-day loss since the onset of the COVID-19 pandemic in March 2020. The steep decline was sparked by news that DeepSeek, a Chinese startup, had developed an AI model that outperformed Western competitors, including OpenAI, both in cost and speed. Despite the sell-off, retail investors saw an opportunity, purchasing over $562 million worth of Nvidia shares on a net basis, setting a new record for daily net inflows into the company.
The divergence in investment strategies between individual investors and institutional counterparts was stark, as Wall Street largely dumped Nvidia stocks. This phenomenon echoes the meme stock craze that swept U.S. markets during the pandemic. The retail investors' confidence in Nvidia comes at a time when the U.S. strategy of investing heavily in AI and data centers is being questioned. President Donald Trump's recent announcement of Stargate, a multi-billion dollar AI initiative, has faced skepticism amid these developments.
Nvidia acknowledged DeepSeek's technological achievements, describing the company's AI model as an "excellent advancement." The success of DeepSeek's offering has intensified debates about the U.S.'s standing in the global AI race. This has not deterred retail investors, who appear undeterred by Nvidia's $600 billion market value loss following Monday's trading.
On social media, Nvidia became the focal point of discussions, especially on the WallStreetBets Reddit forum, where mentions surged more than 175% as its shares dropped. Despite its near $3 trillion market capitalization, making it challenging for individual investors to influence its price significantly, they remain bullish on Nvidia's prospects.
Data from Vanda Research revealed that Nvidia was the most purchased security by average investors on net in 2024, surpassing popular investments like the SPDR S&P 500 ETF Trust (SPY). The retail investor influx underscores a growing trend where Main Street backs tech giants like Nvidia, even when faced with formidable challenges from international competitors.