It’s hard to picture $600 billion. How many jets could it buy? For some sobering context, South Africa’s GDP – the value of all goods and services produced in one year – is around $400 billion.
That’s why the world was shocked when nearly $600 billion was wiped off the market capitalisation of US-based chipmaker Nvidia in one day in January. It was the largest single-day loss in market history. Investors were responding to news from China that DeepSeek had launched an AI model at a fraction of the cost of existing ones on the market. Many perceived this as a blow to market leaders in the US, such as ChatGPT – the AI model made by OpenAI using the computing muscle of Nvidia hardware.
As big and scary as that rapid loss was, we should put this in context before panicking.
The numbers
Nvidia’s $589 billion fall was tremendous. The result was a meaningful blow to portfolios around the globe, given that Nvidia is a staple stock for most investors. But Nvidia is a behemoth. The loss was 17% of its total market value. And it has already begun clawing back some of that loss.
Many long-term investors (as most of us are) have gained far more than a 17% return by holding Nvidia. As of mid-February 2025, Nvidia was up more than 85% for the preceding year and a staggering 1 931% over the previous five years.
Reversion to the norm
DeepSeek’s announcement that it had produced an AI model, the R1, faster and more cheaply than America’s market leaders seems to have sparked what economist J.M. Keynes famously called “animal spirits.” This artful term captures the phenomenon of market panic. Sometimes, investors don’t value assets based on a sound determination of company fundamentals. Instead, when shocking news arrives, we act on emotion.
There is some evidence that this was the case with Nvidia’s selloff. The share price began correcting almost immediately. Short-term traders have been buying leveraged exchange-traded funds designed to generate outsized returns based on Nvidia’s recovery.
A rising tide
The emergence of DeepSeek’s model is also not entirely unexpected. This sort of news was all but guaranteed. China has a large and booming tech sector. It was only a matter of time before it unleashed a worthy competitor to OpenAI, Grok, and other more established products.
Competition is also a good thing. With time, it tends to result in better products and lower prices. For us, the consumer, that means a rising tide that lifts all ships.
In other words, new competitors don’t necessarily eat someone else’s slice of the pie – often, they grow the size of the pie.
It’s worth noting that Nvidia and DeepSeek aren’t direct competitors. The two are in different but highly related industry segments. Nvidia designs the chips used to run ChatGPT, while DeepSeek builds the models that use chips.
In such a new field of technology, more brains experimenting with more approaches in different parts of the world often means better and better solutions. In other words, DeepSeek might make the circle bigger!
Much more than Nvidia
We should also avoid treating Nvidia tantamount to the AI sector. It’s an essential part of it, to be sure. The US firm designs some of the most powerful chips to run generative AI models like ChatGPT, which are changing the world. But there’s much more to it than that.
All major tech companies, from Google’s Gemini to Microsoft Azure, are serious participants in the AI market. These corporations build their own AI products and are highly effective at acquiring and growing smaller firms. This is a big, dynamic area.
You can buy these shares on Shyft in two ways. First, you can buy individual shares. Second, we offer a variety of exchange-traded funds (ETFs) that package shares in companies that are blazing a trail in AI. The latter is perfect for ensuring a diversified portfolio with exposure to AI.
And beyond!
In sum, there is a lot more to AI than Nvidia. The chipmaker’s disastrous day in January gave investors reason to rethink their tactics. However, the AI megatrend is still a mainstay of most portfolios. Shyft offers investors access to dozens of companies in various segments of the AI sector.
With Shyft, you can invest in significant AI shares, including:
- Amazon Inc. (AMZN)
- Nvidia Corporation (NVDA)
- Microsoft Corporation (MSFT)
- Meta Platforms Inc. (META)
- Alphabet Inc. (GOOGL)
- Palantir Technologies Inc. (PLTR)
- Broadcom Inc. (AVGO)
We also have a variety of ETFs that pre-package bundles of tech shares for you. These are weighted for different spheres of the tech sector – from biotech (iShares Biotechnology ETF) to autonomous tech and robotics (ARK Autonomous Technology & Robotics ETF) – and even different regions.
The views and opinions shared are for informational purposes only. They are not intended to serve as investment advice and do not represent the views or opinions of Standard Bank. This information should be used as a starting point for generating investment ideas, and should not be relied upon as the basis for making investment decisions. The Standard Bank of South Africa Limited will not be responsible for the results of any investment decisions made based on the views provided.
