On 27 January 2025, Nvidia's shares plummeted by 17%, wiping out nearly $600 billion from its market capitalisation. This unprecedented drop was triggered by the introduction of a budget-friendly AI model from Chinese startup DeepSeek, raising concerns among investors about potential overspending on AI infrastructure by U.S. companies and the sustainability of Nvidia's premium pricing for GPUs1.

This shockwave has significant implications for the Australian market, particularly for local fund managers and superannuation funds with exposure to Nvidia and other AI-related stocks.

Macquarie, one of Australia's largest investment banks, held 41.8 million Nvidia shares as of June 2024. Following the sell-off, this position would be worth approximately US$5 billion, representing a loss of about US$1 billion in a single day5.

AustralianSuper, the country's largest superannuation fund, had also significantly increased its holdings in Nvidia during 2024. The fund raised its direct investment from 43,997 shares valued at US$39.8 million in March to 942,777 shares by the end of the year4.

If your company relies heavily on data infrastructure, it’s important to think about how a disruption—whether from an insurable event or shifts in the business environment—could affect your income. Beyond the immediate loss, there are often unexpected costs like hiring extra staff, paying overtime, or leasing new equipment or office space. While insurance can help, it’s just one part of a bigger picture: your business continuity plan (BCP).

Many businesses create a BCP, but too often it ends up gathering dust on a shelf. Make sure yours stays up to date, and that the assumptions you’ve made still hold true. Regularly test how your business would handle different disaster scenarios—whether physical, digital, or financial—and identify any gaps, including how your key vendors would respond. A well-maintained BCP can make all the difference in a crisis, helping you bounce back faster, protect your reputation, maintain trust with customers and shareholders, and minimise financial risks. Most importantly, it helps keep your business running, no matter what comes your way.

As AI models become more widespread in Australia, the risk of cyber attacks may increase. Businesses should ensure their cyber insurance policies cover potential breaches or data loss related to AI systems.

With rapid advancements in AI technology, Australian companies should protect their innovations with robust intellectual property insurance, covering legal costs associated with patent infringement claims or theft of trade secrets.

Given the market's volatile reaction to AI developments, Australian company executives may face increased scrutiny over their AI investment decisions and market valuations. D&O insurance can protect leadership from claims related to alleged mismanagement or failure to adapt to changing market conditions3. This is particularly relevant in light of recent events, such as the DeepSeek launch, which suggests that market projections for AI-related companies may need re-evaluation, including those listed on the Australian Securities Exchange (ASX)

Knightcorp’s Practice Lead - Financial Lines, Stuart Quigley said:

"DeepSeek’s impact on the AI sector highlights the volatility that comes with rapid technological advancements. For Australian businesses, particularly those invested in AI, the challenge isn’t just navigating market fluctuations—it’s ensuring they have the right protections in place.

Directors and Officers (D&O) liability, cyber, and intellectual property insurance are now more critical than ever as businesses face increased scrutiny over their AI strategies and exposure to evolving risks."

For Australian companies developing or implementing AI solutions, Technology Liability insurance can provide protection against claims of negligence or failure to deliver promised results through their software or products.

While the market reaction to DeepSeek has been dramatic, it's important to note that this may be just the beginning of a series of disruptions in the AI industry. The AI landscape is likely to remain volatile, with potential for both significant gains and losses6.

Australian companies and investors should remain agile, ready to adapt to new developments, and ensure they have comprehensive risk management strategies in place. As insurance brokers, our role is to help Australian clients navigate these uncertain waters by providing tailored insurance solutions that protect against the unique risks posed by rapidly evolving technologies like AI.

By staying informed about industry developments and maintaining a robust risk management approach, Australian businesses can better position themselves to weather future market storms and capitalise on emerging opportunities in the AI space.

DISCLAIMER: This information is provided to assist you in understanding the risks, implications, and common considerations for your industry.  It does not constitute advice and is not complete. Please contact Knightcorp Insurance Brokers for further information.

REFERENCES:

Evrimagaci.org. (2025). Nvidia Stock Plummets Amid DeepSeek's AI Breakthrough. [online] Available at: https://evrimagaci.org/tpg/nvidia-stock-plummets-amid-deepseeks-ai-breakthrough-164076 [Accessed 30 Jan. 2025].

Investing.com. (2024). Morgan Stanley on what you should do with Nvidia stock in 2025. [online] Available at: https://au.investing.com/news/stock-market-news/morgan-stanley-on-what-you-should-do-with-nvidia-stock-in-2025-3598795 [Accessed 30 Jan. 2025].

Investment Innovation Institute. (2024). AustralianSuper Buys Big into Nvidia. [online] Available at: https://i3-invest.com/2024/10/australiansuper-piles-into-nvidia/ [Accessed 30 Jan. 2025].

Soject.com. (2025). Why Nvidia Stock Plummeted The Impact of DeepSeek's AI. [online] Available at: https://soject.com/why-nvidia-stock-plummeted-the-impact-of-deepseeks-ai/ [Accessed 30 Jan. 2025].

Investing.com. (2025). 2025 could be a peak year for Nvidia stock: analyst. [online] Available at: https://au.investing.com/news/stock-market-news/2025-could-be-a-peak-year-for-nvidia-stock-analyst-3628757 [Accessed 30 Jan. 2025].

PR Newswire. (2024). DataBank Announces ~$2.0 Billion Equity Raise Led by $1.5 Billion Investment from AustralianSuper. [online] Available at: https://www.prnewswire.com/news-releases/databank-announces-2-0-billion-equity-raise-led-by-1-5-billion-investment-from-australiansuper-302275770.html [Accessed 30 Jan. 2025].

Evrimagaci.org. (2025). DeepSeek Disrupts Nvidia, Triggering Historic Stock Drop. [online] Available at: https://evrimagaci.org/tpg/deepseek-disrupts-nvidia-triggering-historic-stock-drop-163338 [Accessed 30 Jan. 2025].

Investopedia. (2025). Applied Digital Stock Surges on Up to $5B Investment by Macquarie. [online] Available at: https://www.investopedia.com/applied-digital-stock-jumps-on-up-to-usd5b-investment-by-australian-fund-macquarie-8774177 [Accessed 30 Jan. 2025].

The Register. (2025). Australia's Macquarie eyes $5B investment in Applied Digital. [online] Available at: https://www.theregister.com/2025/01/15/ai_macquarie_applied_digital/ [Accessed 30 Jan. 2025].