Nvidia Stock Plunges Amid Concerns Over AI Chip Market
Following the release of a new AI model from China's DeepSeek, Nvidia (NVDA) stock experienced a significant decline in premarket trading on Monday. The model raised questions about AI investment and the potential for cost-efficient AI agents.
DeepSeek's model, released on January 20, has been viewed as a potential threat to OpenAI. American venture capitalist Marc Andreessen has described the model as "one of the most amazing and impressive breakthroughs" he has witnessed.
The news sparked concerns that AI models could require fewer chips and energy in the future, potentially impacting Nvidia's position as the world's leading supplier of high-end AI training chips.
Raymond James analyst Srini Pajjuri suggested that if DeepSeek's innovations are widely adopted, it could significantly reduce model training costs, potentially questioning the need for large-scale XPU/GPU clusters.
Other chip stocks also experienced declines premarket, with Broadcom (AVGO) down over 14%, Micron (MU) down almost 8%, and Advanced Micro Devices (AMD) down nearly 5%.
However, some analysts have questioned the validity of DeepSeek's reported $5.6 million training cost, suggesting that it does not include all associated expenses. Bernstein analyst Stacy Rasgon has downplayed the significance of the announcement, calling it "not really worthy of the hysteria that has taken over the social media in recent days."
In addition to DeepSeek's advancements, the US government's tightened export restrictions on AI chips to China could also impact DeepSeek's ability to continue developing new models. These restrictions limit China's access to Nvidia chips through resellers and prevent the import of advanced chipmaking machines from the Dutch firm ASML.
Meanwhile, the US is investing heavily in its own AI infrastructure. President Trump recently announced the Stargate AI project, which plans to invest $500 billion in building US data centers and other infrastructure to support generative AI.