Nvidia Stock Drops Sharply Amidst AI Competition Concerns
On Monday, Nvidia (NVDA) stock witnessed a significant decline of over 17%, resulting in a market cap loss of approximately $600 billion. This downturn was triggered by investor concerns regarding the emergence of a cost-effective AI model developed by Chinese startup DeepSeek.
Despite this decline, retail investors demonstrated a bullish outlook by purchasing over $562 million worth of NVDA shares on Monday. This represented the largest single-day inflow for the stock, as tracked by VandaTrack. On Tuesday, when the stock rebounded by approximately 9%, retail investors continued their buying activity, investing an additional $360 million. Notably, the total retail investment in Nvidia shares across these two volatile trading days exceeded $920 million.
Wall Street experts echoed the optimism of retail investors. Tom Lee, Head of Research at Fundstrat, stated that this may present a "buy the dip" opportunity for Nvidia. Similarly, Bank of America analyst Vivek Arya highlighted the recent downturn as an "enhanced buying opportunity" for Nvidia, along with Broadcom (AVGO) and Marvell (MRVL).
The concerns surrounding Nvidia's future AI chip sales stem from DeepSeek's claims that its AI model utilizes cheaper chips and requires less data. This has raised concerns about the potential impact on US hyperscalers and the sustained upward trend in earnings estimates for Nvidia and other Big Tech companies.
However, Bernstein analyst Stacy Rasgon dismissed the severity of the DeepSeek-driven sell-off, arguing that it is "overblown" and does not represent a harbinger of doom for AI infrastructure.