Nvidia shares rose 7% to $126.70 on Tuesday, partially recovering from a 17% drop the day before, which marked its largest one-day decline since March 2020.
The stock’s dramatic fall was triggered by DeepSeek, a Chinese startup claiming to have developed an AI model that rivals leading Western technologies at a fraction of the cost.
Market Reaction to DeepSeek’s Claims
DeepSeek’s AI advancements led many investors to question whether AI spending would slow down. However, analysts argue that these concerns are overblown.
Mizuho Securities analyst Vijay Rakesh believes that the AI market will continue to grow, with a bigger total addressable market in the long term.
Nvidia’s Position in the AI Boom
Despite DeepSeek’s innovations, analysts emphasize that Nvidia remains essential to AI growth. Citi analysts highlighted that DeepSeek’s model still relies on cloud service providers, ensuring continued demand for Nvidia’s GPUs.
Moreover, Morningstar strategist Brian Colello maintained that AI GPU demand still exceeds supply, and tech firms will continue to buy all the GPUs they can.
Upcoming Earnings Reports Key for Nvidia
Nvidia’s future will depend on the earnings reports of Microsoft and Meta this week. If these companies indicate strong demand for AI hardware, Nvidia’s stock could see further recovery.
Final Takeaway
While DeepSeek’s AI breakthrough is significant, it is unlikely to significantly impact Nvidia’s dominance in the AI GPU market. The demand for AI hardware remains robust, and Nvidia’s position in the AI boom is secure.
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