Nvidia Stock Faces Sharp Decline as AI Rival Emerges

Core Viewpoint - Nvidia Corp is experiencing a significant decline in stock price, with an 11.8% drop in pre-market trading, marking its worst performance since March 2020 [1] Group 1: Market Reaction - The sell-off was initiated by the release of a free, open-source large-language model by Chinese startup DeepSeek, developed in two months at a cost of under $6 million, raising concerns about Nvidia's chip demand and market competitiveness [2] - Other chipmakers, including Advanced Micro Devices (AMD), Taiwan Semiconductor (TSM), and Microsoft (MSFT), are also facing notable declines alongside Nvidia [3] - Nvidia's stock is set to erase its 6.2% gain for the year and is expected to open at its lowest point since early October, although it remains over 100% higher compared to a year ago [3] Group 2: Options Market Dynamics - The pullback in Nvidia's stock may lead to an unwinding of bullish positions in the options market, with a 50-day call/put volume ratio of 2.53 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), indicating elevated bullish activity that could increase downward pressure [4] - Options trading presents an opportunity for investors considering Nvidia's next move, as the Schaeffer's Volatility Index (SVI) is at 38%, ranking in the low 2nd percentile of its 12-month range, suggesting low volatility expectations [5] - Nvidia has a history of exceeding volatility expectations, reflected in its Schaeffer's Volatility Scorecard (SVS) rating of 76 out of 100 [5]