AI Chipmaker Nvidia Sees Resurgence After Historic Market Cap Plunge
The artificial intelligence (AI) chipmaking giant Nvidia (NVDA) experienced a remarkable 9% surge in stock value on Tuesday, recovering from a staggering 17% decline the previous day. This dramatic swing was triggered by investor concerns surrounding a new, cost-effective AI model unveiled by Chinese startup DeepSeek.
DeepSeek’s AI Breakthrough Sparks Industry Anxiety
DeepSeek’s innovative approach, which reportedly utilized fewer AI chips and reduced training costs, raised eyebrows among Wall Street analysts. They questioned whether US firms, including Nvidia, were overspending on AI infrastructure. This concern sparked fears that Nvidia’s high-priced graphics processing units (GPUs) might face downward pressure, leading to a potential decline in semiconductor demand.
Record-Breaking Market Cap Loss
The fallout from DeepSeek’s announcement was severe, with Nvidia’s market capitalization plummeting by a record $589 billion in a single day. The tech-heavy Nasdaq (^IXIC) also felt the impact, dropping 3%. The ripple effect was felt across the chip industry, with Broadcom (AVGO) initially tumbling before recovering 2.6% on Tuesday.
Nvidia Remains Unfazed
Despite the market turmoil, Nvidia expressed optimism about DeepSeek’s AI advancement, calling it “excellent” in a statement. Meanwhile, Wall Street analysts continued to scrutinize the situation, voicing skepticism about DeepSeek’s claimed low costs and the implications for AI stocks.
Analysts Weigh In on DeepSeek’s Claims
JPMorgan analyst Harlan Sur and Citi analyst Christopher Danley questioned the validity of DeepSeek’s reported costs, citing the company’s reliance on Meta’s open-source Llama AI model. They argued that these costs did not fully account for the startup’s expenses. “We believe it is crucial to validate these costs before drawing conclusions,” Sur wrote. Danley added that the growth potential in AI spending remains strong, despite DeepSeek’s claims.
A Glimmer of Hope for AI Stocks
While DeepSeek’s achievement is undeniable, analysts like Raymond James’ Srini Pajjuri noted that the startup’s limited access to computing resources makes its accomplishment all the more impressive. This could be a sign that AI innovation is still in its early stages, with plenty of room for growth and development. As the AI landscape continues to evolve, one thing is clear: the future of AI chipmaking is full of opportunities and challenges.
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