Chipmaker Nvidia’s Recovery Faces Uncertainty
A Warning from a Seasoned Fund Manager
Dan Niles, founder and portfolio manager at Niles Investment Management, has cast doubt on Nvidia’s ability to recover from its recent share price fall. The chipmaker’s stock plummeted 16.9% on Monday after a Chinese startup, DeepSeek, unveiled a free, open-source large language model built in just two months at a fraction of the cost of other major players.
Concerns Over AI Investment
This development has sparked concerns about the level of investment big tech companies will make in AI, which has hit the shares of Nvidia, a key AI chipmaker. Niles believes that investors should be cautious about assuming that the worst is over for Nvidia, as the company’s revenue growth may slow down significantly.
A Gloomy Forecast Ahead
Niles predicts that Nvidia’s revenue growth may decline from 50% to 20-30%, which could lead to a further decline in the company’s stock price. He also notes that the emergence of DeepSeek’s R1 model could potentially fracture the relationship between AI backer Microsoft, OpenAI, and Nvidia.
Microsoft’s Role in AI Development
Microsoft has been a driving force behind OpenAI, the creator of ChatGPT, and has invested nearly $14 billion in the AI startup to date. However, Niles believes that Microsoft’s capital expenditure on AI could slow down significantly, from growing 70-80% to basically flat by June.
The Future of AI Investment
The question on everyone’s mind is what return on investment can be expected from the massive spending on AI. Niles believes that the answer so far has been “no,” and that we will have to wait and see how this plays out.
A Cautionary Tale for Investors
In light of these developments, investors should exercise caution when considering Nvidia’s stock. While the company may bounce back from Monday’s massive move, there is still a lot of uncertainty surrounding its future growth prospects.
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