NVIDIA Stock Plunges Amidst DeepSeek AI Model Concerns
On Monday, NVIDIA (NVDA) stock witnessed a significant decline of over 17%, wiping out nearly $600 billion in market capitalization. This fall was attributed to investors' concerns over the growing popularity of DeepSeek, a Chinese startup's cost-effective artificial intelligence (AI) model.
However, retail investors seized the opportunity to acquire NVDA shares at a discount. VandaTrack data revealed that on Monday, retail investors purchased over $562 million worth of the stock, marking the largest single-day inflow in VandaTrack's dataset. Tuesday saw a further $360 million worth of retail purchases as the stock rebounded and climbed roughly 9%. Over the two days of market volatility, retail investors invested more than $920 million in NVIDIA.
Wall Street strategists generally concurred with retail investors' optimistic outlook on NVDA. Tom Lee, Fundstrat's head of Research, described the situation as a "buy the dip" moment on Monday evening. Bank of America analyst Vivek Arya echoed this sentiment, suggesting that the recent decline in NVIDIA, Broadcom (AVGO), and Marvell (MRVL) stocks presents an enhanced buying opportunity.
While DeepSeek claims its new AI model utilizes more affordable chips and less data, investors express concerns about the potential impact on NVIDIA's future AI chip sales. They also question whether US hyperscalers' dominance in the market may be challenged. Furthermore, the incident has the potential to disrupt the trend of bullish earnings revisions that NVIDIA and other Big Tech companies have enjoyed.
Despite these concerns, Bernstein's Stacy Rasgon downplayed the significance of the DeepSeek-driven sell-off, stating that it is "overblown." He emphasized that these developments do not herald the "doomsday for AI infrastructure."