Nvidia shares are experiencing a rebound after a significant slump, driven by concerns over the impact of DeepSeek's cost-effective AI model on demand for Nvidia's products. DeepSeek, a Chinese AI company, has introduced a new AI model that rivals established players like OpenAI's ChatGPT, but at a fraction of the cost. This development initially sent shockwaves through the market, leading to a 17% drop in Nvidia's stock as investors worried about potential declines in demand for Nvidia's advanced chips, which are crucial for AI development. DeepSeek's model, developed using lower-powered Nvidia H800 chips, has been praised for its efficiency and cost-effectiveness, raising questions about the sustainability of high investment levels in AI by U.S. companies.
Despite the initial panic, some analysts believe the fears may be overblown. While DeepSeek's innovations are noteworthy, there is skepticism about its ability to significantly disrupt Nvidia's market position, especially in the U.S. market. Analysts like Dan Ives from Wedbush Securities have expressed doubts about major U.S. companies adopting DeepSeek's technology for their AI infrastructure, emphasizing Nvidia's continued dominance in launching autonomous and AI use cases. Additionally, the open-source nature of DeepSeek's model could foster more research and development, potentially benefiting the broader AI ecosystem.
Nvidia's stock is currently trading at $124.61, marking a 5.23% increase from its previous close of $118.42 on January 27th.