NVIDIA Tumbles as Chinese AI Model Prompts Questions on Spending
Shares of NVIDIA (NVDA) took a hit on Monday, plunging over 14%, amid concerns sparked by the launch of an advanced AI model from Chinese startup DeepSeek.
DeepSeek's R1 model has garnered attention for its capabilities, rivaling models from tech behemoths like OpenAI and Google. This has raised questions about the necessity and sustainability of massive AI spending by US tech giants like Microsoft, Alphabet, and Amazon.
Analysts expressed varying views on the implications of DeepSeek's success. Citi analysts cast doubt on its performance without advanced chips, maintaining their "buy" rating on NVIDIA. Jefferies analysts, however, cautioned that DeepSeek could force Silicon Valley companies to prioritize efficiency and ROI, potentially reducing demand for high-computing power.
Concerns over the impact of future AI models on computing power also affected other high-growth AI stocks, such as Vistra (VST) and Constellation Energy (CEG). NVIDIA competitor Broadcom (AVGO) also saw a decline of over 12%.