Stocks and The Great American Psychology Experiment

The American stock market has long been viewed as an impartial metric of financial success. In reality, it is also driven by perception, hype, and fear. Nowhere is this more evident than in the AI sector, where even the slightest rumor or narrative shift can send valuations soaring or crashing. The recent turmoil surrounding NVIDIA’s stock and the sudden rise of DeepSeek highlight how belief—whether inherent or carefully engineered—dictates market performance.

Retail investors, in particular, are a force to be reckoned with. Data shows they purchased a record $562.2 million worth of NVIDIA shares on January 27, 2025, after the stock plummeted. This aggressive buy-in suggests that many saw the dip as an opportunity rather than a warning sign. Understanding these investor behaviors is crucial for companies looking to maintain stability in volatile markets. A well-planned PR strategy can mitigate unnecessary disruptions and shape perception before panic sets in.

DeepSeek’s Disruptive PR Cycle.

The Chinese AI research lab DeepSeek recently made waves with its R1 model, an AI system that purportedly rivals OpenAI and Anthropic at a fraction of the cost. The rollout was accompanied by a well-coordinated public relations campaign saturating tech media and financial news with the idea that DeepSeek could disrupt the AI arms race.

The impact was immediate.

On January 27, 2025, NVIDIA’s stock price fell by $24.20, closing at $118.42—a 17% decline that erased nearly $600 billion in market value, the largest single-day decline in dollar value in U.S. history. This market reaction wasn’t based on verified evidence of DeepSeek’s technological superiority but on the narrative that it could fundamentally alter AI economics. There is no widespread validation of DeepSeek’s claims, and concerns persist about whether their models rely on stolen technology. Yet the damage to NVIDIA was done, and confidence in its future has been shaken. For only $5 million, DeepSeek was able to singlehandedly disrupt the entire U.S. market for a week.

NVIDIA’s Future Opportunity.

From the public’s perspective, NVIDIA seemed to be taken by surprise. This begs the question: was this part of a broader strategy for NVIDIA, or were they as caught off guard as it seems? Assuming it’s the latter, there are some strategic shifts NVIDIA may want to make to ensure they are better prepared for competitive disruption – including better monitoring of the online conversations through tools like SIREN, proper scenario planning, and employing robust marketplace defense and competitive offensive strategies.

The warning signs were there: whispers about DeepSeek had been circulating, and industry veterans understood that any major AI breakthrough—especially from China—would carry geopolitical, security, and economic implications. NVIDIA could have developed a more cohesive response for when this news broke. Instead, when the market reacted to DeepSeek, there was no immediate and concise effort to stabilize investor confidence, counter DeepSeek’s narrative, or reaffirm why NVIDIA’s chips remain the backbone of AI computing. Success isn’t just about making great products, it’s about shaping the perception of their indispensability. Better anticipating and preparing for challenges like this could have allowed them to build out a clear messaging strategy ahead of time.

The Stock Market Runs on Confidence.

DeepSeek’s meteoric rise and NVIDIA’s sudden stumble underscore a fundamental truth: success in the American stock market isn’t just about financials—it’s about belief. Confidence is currency, and in today’s market, perception often outruns reality.

Right now, AI is the market’s obsession, and anything associated with it commands an outsized share of attention—sometimes without much scrutiny. Shiny objects attract investors, and soft metrics, like app store downloads or a few million dollars in seed funding, can drive valuations in ways that defy logic. Meanwhile, real financial powerhouses can see billions shaved off their market caps in an instant, as we saw with NVIDIA.

For crisis managers and PR professionals, this environment isn’t just noise—it’s a reminder that managing perception is as critical as innovation itself. Mergers, acquisitions, and proxy fights aren’t just financial maneuvers; they’re narrative battles. The companies that align their financial and communications strategies don’t just survive these shifts—they profit from them.

Stabilizing and Reassuring Investors.

NVIDIA’s long-term prospects remain strong—DeepSeek’s claims are unverified, and NVIDIA’s dominance in AI hardware won’t disappear overnight. However, if investors sense uncertainty from leadership, panic could cause further instability.

NVIDIA needs to reassure stakeholders that its roadmap remains intact, emphasizing its technological edge and continued importance within the ever-growing AI infrastructure. Strategic communication, direct engagement with investors, and an assertive counter-narrative to DeepSeek’s claims should be top priorities. This isn’t just about protecting stock price; it’s about reaffirming NVIDIA’s position in the AI hierarchy.

It’s also to NVIDIA’s advantage that the U.S. government remains deeply distrustful of China. The government has already shown its willingness to prevent Chinese companies from operating in this country, making it very difficult for companies like DeepSeek to gain a foothold. It is in NVIDIA’s best interest to keep it that way, and they would be wise to put substantial effort into encouraging continued regulation against its Chinese rivals.

Perception Shapes Markets.

DeepSeek’s PR success and NVIDIA’s stumble reinforce a crucial reality: financial markets are shaped as much by perception as by true economics. It’s not enough for companies to make great products; they must also control the story being told about them and be on alert for growing narratives that threaten their perception. In a world where stock prices swing on speculation, narrative management is a vital business strategy. Those who understand this dynamic thrive. Those who ignore it fail.

One Final Note.

As much as companies must recognize how perception impacts stocks, investors should too. I’m not a financial expert and won’t tell anyone what to do with their investments, but one cautionary note: as someone who spends their days with clients in varying stages of panic, fear-based reactions rarely lead to the best strategic decisions.