Nvidia Corp. (NASDAQ:NVDA) has acknowledged China’s DeepSeek R1 artificial intelligence model. The startup’s emergence coincided with a $600 billion decline in Nvidia’s market value on Monday.

What Happened: The endorsement came as DeepSeek’s open-source AI model, developed for under $6 million, reportedly outperformed leading U.S. models like those from OpenAI. The achievement sparked a broader tech selloff, with Nvidia shares falling 17% and AI infrastructure stocks tumbling over 20%.

“DeepSeek’s work illustrates how new models can be created using test time scaling, leveraging widely-available models and compute that is fully export control compliant,” an Nvidia spokesperson told CNBC.

DeepSeeks “inference requires significant numbers of Nvidia GPUs and high-performance networking,” Nvidia said according to Reuters.

The company emphasized that DeepSeek used approved GPU versions designed for the Chinese market, countering claims about potential export violations.

The market reaction highlighted growing concerns about AI infrastructure spending after DeepSeek demonstrated comparable performance to U.S. models at a fraction of the cost. Major tech companies have committed massive capital to AI development, with Microsoft Corp. (NASDAQ:MSFT) planning $80 billion in AI infrastructure spending for 2025 and Meta Platforms Inc. (NASDAQ:META) projecting $60-65 billion.

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Why It Matters: Wedbush analyst Dan Ives called the selloff a “golden buying opportunity,” arguing that “No US Global 2000 is going to use a Chinese startup DeepSeek to launch their AI infrastructure.”

The development aligns with recent discussions by industry leaders about “test-time scaling,” a concept championed by Nvidia CEO Jensen Huang and OpenAI CEO Sam Altman. This approach suggests AI models can achieve better results by using additional computing power during inference rather than just during training.

DeepSeek’s rapid rise – becoming the most downloaded app on Apple Inc.‘s U.S. App Store – has sparked debate about the sustainability of massive AI investments and their impact on data center infrastructure providers like Vertiv Holdings Co. (NYSE:VRT) and Vistra Corp. (NYSE:VST), which saw their shares plummet by nearly 30% on Monday.

Price Action: Nvidia’s stock closed at $118.58 on Monday, down 16.86% for the day. In after-hours trading, the stock edged up 1.35%. Over the past year, Nvidia’s stock surged 89.81%, according to data from Benzinga Pro.

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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.