Nvidia (NVDA) faced a significant market sell-off on January 27, 2025, when China’s DeepSeek claimed to have developed an AI model comparable to OpenAI’s ChatGPT at a fraction of the cost.
Despite the initial reaction, Nvidia has praised DeepSeek as an “excellent AI advancement,” recognizing it as an opportunity for the AI market, and analysts are now questioning if investors should buy the dip on Nvidia stock.
DeepSeek’s $5.6 Million AI Breakthrough
DeepSeek, a Chinese startup, claimed it spent just $5.6 million to develop its AI chatbot using older Nvidia GPUs that comply with U.S. export restrictions.
The initial claim caused Nvidia’s stock to drop, as the idea of a rival creating powerful AI with limited resources raised concerns about Nvidia’s competitive edge.
Nvidia’s Response
Nvidia, however, viewed DeepSeek’s progress as a positive development, noting that it shows the potential of leveraging widely available AI models and GPUs.
Nvidia also pointed out that DeepSeek’s success in China could increase demand for its chips, especially in a market where Nvidia has a strong revenue presence.
Analysts’ View on the Sell-Off
Many analysts disagreed with the initial market reaction. They suggested that DeepSeek’s achievement could benefit the broader AI market, driving down costs and increasing accessibility for AI developers.
Some see it as an opportunity for companies to build AI models more efficiently, even if it creates competition for Nvidia.
Should You Buy Nvidia?
Despite the market’s short-term concerns, Nvidia’s position remains strong. With Nvidia’s dominant position in AI hardware and its extensive resources, the company is likely to stay ahead of competitors in the long run.
The AI landscape is still in its early stages, and DeepSeek’s success could further drive the demand for Nvidia’s chips.
For long-term investors, Nvidia could still be a strong bet, despite some near-term volatility in stock prices.