Nvidia Stock Tanks Amid AI Model Competition, But Retail Investors Buy the Dip
Nvidia (NVDA) shares plummeted on Monday, shedding over 17% and eroding nearly $600 billion from its market capitalization. The decline was fueled by investor concerns over the increasing popularity of a cost-effective AI model developed by Chinese startup DeepSeek.
Retail Investors Step In
Despite the downturn, retail investors seized the opportunity to buy the dip. According to data from VandaTrack, retail investors purchased over $562 million worth of NVDA shares on Monday, the largest one-day inflow in the company's history. On Tuesday, as the stock rebounded and climbed roughly 9%, retail buying surged again, totaling nearly $360 million.
Wall Street Analysts Concur
Wall Street strategists echoed the bullish sentiment among retail investors. "We believe this is likely to evolve into a 'buy the dip' moment for Nvidia," said Fundstrat Research head Tom Lee. Bank of America analyst Vivek Arya also expressed optimism, stating that the recent pullback in NVDA, Broadcom (AVGO), and Marvell (MRVL) presented an "enhanced buying opportunity."
Concerns Over AI Chip Dominance
The DeepSeek AI model has raised concerns about the potential impact on AI chip sales and the dominance of US hyperscalers in the market. The model reportedly uses cheaper chips and less data, casting doubt on the long-term growth prospects of companies like Nvidia.
Bernstein Analyst Downplays Concerns
Stacy Rasgon of Bernstein dismissed the impact of the DeepSeek model, stating that the sell-off was "overblown." He emphasized that the new developments do not indicate "doomsday for AI infrastructure."