Nvidia Recovers After DeepSeek-Induced Market Rout
Nvidia (NVDA) shares surged 2.6% premarket on Tuesday, partially recovering from a significant decline on Monday that erased nearly $600 billion from its market capitalization. The chipmaker's gains moderated after the market opened, with shares rising less than 1%.
DeepSeek Concerns Spark Market Volatility
Monday's 17% drop in Nvidia's stock was attributed to investor fears sparked by DeepSeek, a Chinese startup that unveiled a cost-effective AI model. Analysts expressed concerns that DeepSeek's lower training costs for its AI models, achieved by using fewer AI chips, could indicate overspending by US firms on AI infrastructure. This raised worries about potential pressure on Nvidia's premium GPU pricing and a decline in demand for semiconductors.
Nvidia Remains Undeterred
Despite the market turmoil, Nvidia remained relatively unfazed by the DeepSeek development, referring to it as "an excellent AI advancement." Analysts, however, continued to assess the implications of DeepSeek's low-cost claims and the broader impact on AI stocks.
Analysts Remain Skeptical of DeepSeek's Costs
Some analysts questioned DeepSeek's reported costs, suggesting that the startup may not have accounted for all expenses associated with training its AI models. They pointed to DeepSeek's use of "distillation," which leverages Meta's open-source Llama AI model, and argued that the true costs may be underestimated.
Continued Growth in AI Spending Expected
Despite the DeepSeek-related concerns, analysts generally believe that AI spending will continue to grow strongly. They cite the infancy of AI technology and the ongoing need for cloud service providers to invest in compute capacity.
Disclaimer: This article is for informational purposes only and should not be construed as investment advice.