What Happened?

Shares of data center products and services company Vertiv (NYSE:VRT) fell 28.5% in the afternoon session as stocks heavily tied to the AI market took a hit after Chinese artificial intelligence startup DeepSeek released a new large language model (DeepSeek-R1) that ranks competitively on key global benchmarks (coding competitions, math evaluation), uses less advanced semiconductor chips, costs significantly less to build (at $5.5 million - excluding non-compute costs), and has already achieved strong adoption after topping the iPhone Play Store for AI apps. 

Notably, the company has also open-sourced this model, a move that may make it harder for rivals to justify huge upfront expenditures on hardware, software, and expertise to develop similar systems. Speaking at the World Economic Forum in Davos, Switzerland, Microsoft CEO Satya Nadella praised DeepSeek's efforts, calling the new model "super impressive" for its open-source design, efficient inference-time computing, and high compute efficiency. "We should take the developments out of China very, very seriously," he added. 

Nadella's comments suggest that upstarts like DeepSeek could reshape the competitive landscape of AI. DeepSeek's announcement disrupts long-held assumptions in key ways: 1.) It undercuts the narrative that bigger budgets and access to top-tier chips are the only ways forward for AI development. 2.) By using less advanced hardware, DeepSeek opens the door for innovators who face high chip costs or export restrictions, reaffirming they can still compete. 3.) The model's success questions the growth narrative of companies that develop AI-powered chips and the infrastructure that supports the production and maintenance of these AI tools, including data center servers, and the construction, maintenance, and energy management of these platforms. 

Overall, today's news shows that the market sees more uncertainty in demand as DeepSeek shows that top-tier infrastructure may not be as needed.

The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Vertiv? Access our full analysis report here, it’s free.

What The Market Is Telling Us

Vertiv’s shares are extremely volatile and have had 42 moves greater than 5% over the last year. But moves this big are rare even for Vertiv and indicate this news significantly impacted the market’s perception of the business.

Vertiv is down 14.4% since the beginning of the year, and at $101.24 per share, it is trading 34% below its 52-week high of $153.49 from January 2025. Investors who bought $1,000 worth of Vertiv’s shares 5 years ago would now be looking at an investment worth $8,326.

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