Nvidia Stock Plunges Amid AI Sell-Off, but Analysts Caution Against Panic
Overview:
The announcement of DeepSeek, an open-source large language model, sparked a sell-off in tech stocks, with Nvidia (NVDA) leading the decline. However, analysts believe the panic-selling may be excessive and highlight the potential benefits of AI innovation.
Nvidia's Steep Decline:
Nvidia's stock plunged 16.9% on Monday, erasing $589 billion from its market cap. This sent a ripple through the broader tech sector, with other chip stocks and tech giants Alphabet (GOOGL) and Microsoft (MSFT) also experiencing declines.
Analyst Perspectives:
Bernstein's Stacy Rasgon believes the market's reaction is "overblown," arguing that DeepSeek's development does not signal "doomsday for AI infrastructure." He emphasizes that AI's compute needs are far from reaching their limits.
Futurum's Daniel Newman echoes this sentiment, citing the Jevons Paradox, which suggests that efficiency gains in resource use will increase overall consumption. He predicts that AI's increased efficiency will expand its use and benefit companies.
Microsoft's Optimism:
Microsoft CEO Satya Nadella tweeted that AI's growing efficiency will lead to skyrocketing use. Analyst Rasgon agrees, adding that spending on AI is expected to continue accelerating.
Wall Street's Response:
The initial panic on Wall Street eased somewhat later in the session, with Microsoft closing well off its lows. Amazon and Meta also finished the day with gains.
Broader Market Outlook:
Principal Asset Management's Seema Shah believes the macro environment remains constructive for earnings across most sectors and downplays correction fears. She sees the development of DeepSeek as ultimately positive for global productivity.
Conclusion:
While DeepSeek's announcement has caused a temporary sell-off in tech stocks, analysts caution against excessive panic. They emphasize the potential benefits of AI innovation and highlight the likelihood of continued spending on AI infrastructure.