Investing.com -- Nvidia Corporation (NASDAQ: NVDA ) has defended its artificial intelligence (AI) strategy, following a significant drop in its share price. The company's shares fell as much as 18% on Monday, marking the largest intraday fall since March 2020 and lowering the company's market capitalization by $560 billion. This decline was the most substantial in US stock market history, surpassing the previous record of a 9% drop in September that resulted in a loss of about $279 billion in value.

Nvidia's share price tumble was prompted by concerns about Chinese AI startup DeepSeek, which recently launched a free assistant that uses less expensive chips and less data. This development appeared to challenge the prevailing market expectation that AI will stimulate demand along a supply chain from chipmakers to data centers. DeepSeek's AI Assistant also outperformed rival ChatGPT on Monday to become the top-rated free application available on Apple (NASDAQ: AAPL )'s App Store in the United States.

In response to these events, Nvidia issued a statement to Investing.com on DeepSeek. The company described DeepSeek as "an excellent AI advancement and a perfect example of Test Time Scaling." Nvidia further explained that "DeepSeek’s work illustrates how new models can be created using that technique, leveraging widely-available models and compute that is fully export control compliant. Inference requires significant numbers of NVIDIA GPUs and high-performance networking. We now have three scaling laws: pre-training and post-training, which continue, and new test-time scaling.”

The decline in Nvidia's shares contributed to a drop in the S&P 500 and the Nasdaq on Monday. The company's shares reached their lowest level since Oct., 2024.

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