NVIDIA Stock Plummets Amid AI Model Concerns
NVIDIA (NVDA) shares witnessed a sharp decline on Monday following the release of a cutting-edge artificial intelligence (AI) model by Chinese startup DeepSeek. The model, named R1, has raised questions about the necessity of excessive AI spending by US tech giants.
DeepSeek's R1 model has demonstrated capabilities comparable to those developed by OpenAI and Google, despite utilizing fewer and less powerful chips. This has sparked concerns among US investors, who worry about the implications for highly valued US tech stocks.
NVIDIA's earnings and stock price have surged in recent years due to substantial spending on its AI systems by companies such as Microsoft, Alphabet, and Amazon. However, DeepSeek's success has led to speculation that such spending may be unwarranted.
Wall Street analysts have expressed varying opinions on DeepSeek. Citi analysts remain skeptical about its results, maintaining their "buy" rating on NVIDIA stock. Jefferies analysts, on the other hand, believe DeepSeek's success could prompt Silicon Valley leaders to prioritize efficiency and ROI, potentially reducing demand for computing power in the future.
Concerns about the potential decline in demand for computing power also affected other AI stocks. Vistra (VST) and Constellation Energy Corp. (CEG) declined by 20% and 18%, respectively. NVIDIA competitor Broadcom (AVGO) lost over 12% of its value.