NVIDIA stock: AI chipmakers rumble on Deepseek News

News reports that Chinese artificial intelligence lab Deepseek has created an AI model that rivals American models but at a much lower cost sent shockwaves through AI chip stocks on Monday. Nvidia (NVDA) warehouse and others threw themselves.

Deepseek developed its AI system without cutting-edge foreign processors, which China is restricted from obtaining due to US export curbs. The Chinese company says it built its system for less than $6 million, versus the billions spent by rivals. It is also much cheaper to operate than those of our rivals such as Openai and Meta platforms (Meta).

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The news comes after we Venture Stargate announced plans to spend as much as $500 billion on AI infrastructure over the next four years.

Silicon Valley Venture Capitalist Marc Andreessen described DeepSeek-R1 as “AI’s Sputnik moment“A reference to when the Soviet Union launched the first artificial Earth satellite in 1957, starting the space race.

ONE The cable Article said Deepseek focused on “maximizing software-driven resource optimization” since it didn’t have access to the latest AI processors from NVIDIA and others.

Deepseek came up with more efficient methods to train its models, such as using custom communication schemes between chips, reducing the size of fields to save memory and an innovative use of the mixed-mode approach, according to the wired article.

In morning trading on the stock market today, NVIDIA shares fell 12% to 125.24. Among AI chip peers, Broadcom (Leave) fell 12% to 215 and Marvell technology (Mrvl) fell 14% to 106.70. Advanced Micro Devices (AMD) retreated 6% to 115.79.

Other AI-related chip stocks also fell on Monday. Chip Foundry Taiwan Semiconductor Manufacturing (TSM) Release 9% to 201.22. Hot Ipo Stock Astera Labs (Alab) fell 13% to 100.38.

Possible pause in AI infrastructure spending

The Deepseek news could lead to a pause in AI infrastructure spending by hyperscale cloud service providers as they consider their capital expenditures, Evercore ISI analyst Amit Daryanani said in a client note on Monday.

“We think some of the risk in the short term will be around ‘should we spend that much on CAPEX with a cheaper alternative?’,” Daryanani said. “It’s likely that over time this will end up being a scenario, where cloud/enterprises can do even more AI-centric work and do it beyond text to images to video.”

Jordan Klein, a trading desk analyst at Mizuho Securities, said Deepseek News has created a “sell first and ask questions later” type of reaction among investors. On the other hand, he would avoid buying AI stocks on the pullback.

“When the AI ​​trade and narrative is this crowded and up so much, the damage could take a while to fully play out,” Klein said in a client note Monday.

He said there was misinformation about the cost of developing Deepseek’s AI model and what it achieved.

NVIDIA stock, other AI chipmakers on tech leaders List

Bernstein analyst Stacy Rasgon said the Deepseek news does not spell doomsday for AI builds.

“The resulting Twitterverse panic over the weekend seems overblown,” Rasgon said in a client note Monday. “According to the many (occasionally hysterical) hot takes we saw, the implications range anywhere from ‘this is really interesting’ to ‘this is the death knell of the AI ​​infrastructure complex as we know it.'”

Meanwhile, demand for AI chips and data centers is still rising, Rasgon said.

“Investment is still accelerating,” he said. “Right on top of all the deep sea news flow last week, we got meta to increase their CAPEX for the year. We got the Stargate announcement. And China announced a trillion yuan (about $140 billion) AI spending plan. We still need , and get, a lot of chips.”

Rasgon reiterated his buy ratings on NVIDIA stock and Broadcom stock.

NVIDIA stock is on the IBD Tech Leaders list along with Astera Labs, Broadcom, Marvell and Taiwan Semiconductor.

Follow Patrick Seitz on X, formerly Twitter, at @IBD_PSEITZ For more stories on consumer technology, software and semiconductor stocks.

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