Nvidia shares plunge as DeepSeek promises new AI path
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Nvidia CEO Jensen Huang speaks during the 2025 CES event in Las Vegas. Photo: Bridget Bennett/Bloomberg via Getty Images
Nvidia Monday complimented a new Chinese AI model whose emergence is prompting investors to question the boom narrative surrounding the darling of American AI.
Why it matters: Nvidia's heliocentric position in the AI universe has been taken as gospel truth until now, delivering immense stock gains and serving as a bellwether stock for the AI economy.
The big picture: The sudden rise of DeepSeek — whose latest R1 model was publicly launched a week ago — is startling investors with its efficient design and effective results.
- If the company's claims hold true, it may have discovered a cheaper path to AI breakthroughs.
Threat level: That could be problematic for Nvidia, whose valuation is directly tied to its ability to sell expensive and immensely profitable advanced chips to tech customers.
- Nvidia's stock was down more than 17% to $118.03 at 3:45 pm ET Monday.
- Other AI-driven stocks were also down.
- "People are selling first and will ask questions later," Morningstar chief U.S. market strategist Dave Sekera wrote today.
What they're saying "DeepSeek is an excellent AI advancement and a perfect example of Test Time Scaling," an Nvidia spokesperson said Monday in a statement, referring to the technical approach that has made reasoning models like OpenAI's o1 and DeepSeek's R1 possible.
- "DeepSeek's work illustrates how new models can be created using that technique, leveraging widely-available models and compute that is fully export control compliant."
- The company sought to downplay the idea that DeepSeek's model reduces the need for its advanced hardware, however. The process of training an AI model, known as inference, "requires significant numbers of NVIDIA GPUs and high-performance networking," the spokesperson added.
What we're watching: Market observers are still trying to discern whether today's selloff is an overreaction — or whether the bloom is coming off the Nvidia rose.
- "I believe the demand for the best AI hardware will persist," tech analyst Gene Munster said today on X. "Hyperscalers, enterprises, and sovereign entities are not looking for a cheaper way to achieve AGI. They're looking for a faster way to get there" and DeepSeek '"doesn't alter that dynamic."
- An Nvidia spokesperson did not respond to a request seeking further comment.
