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OEXN: DeepSeek Sparks Concerns Over AI Costs, Driving Nvidia and Chip Stocks Lower Amid Market Sell-

Nvidia (NVDA) shares tumbled nearly 17% Monday, driving a sell-off in chip stocks and the broader market. The decline follows the release of a groundbreaking AI model by China’s DeepSeek, which has raised questions about the future of AI investment and demand for high-end chips. DeepSeek’s new model, unveiled on Jan. 20, has been described as a major innovation, with venture capitalist Marc Andreessen calling it “one of the most impressive breakthroughs” he has witnessed. Notably, DeepSeek claimed it trained the model for just $5.6 million, compared to over $100 million for OpenAI’s GPT model, fueling speculation about the need for costly GPU clusters. Raymond James analyst Srini Pajjuri noted that if DeepSeek’s methods are widely adopted, it could reshape the economics of AI model training. However, he also suggested it may drive U.S. tech giants to leverage their access to GPUs to maintain an edge. Bernstein analyst Stacy Rasgon, while skeptical of DeepSeek's cost claims, warned against overreacting, highlighting the hidden expenses in AI development. Geopolitical tensions also factor into the landscape. U.S. export restrictions limit China’s access to Nvidia chips and advanced chipmaking tools. Simultaneously, the U.S. is ramping up AI investments, including the $500 billion Stargate AI project announced by President Trump, aimed at strengthening domestic AI infrastructure. The developments spotlight growing competition and uncertainty in the AI and semiconductor industries, posing challenges for Nvidia and its peers.

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Publication date:

2025-01-27 22:59:31 (GMT)

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