Training AI hardware might not be as expensive as we thought.
DeepSeek, the little-known Chinese AI company, probably made Silicon Valley question whether the growth logic of AI has been upended. The company claims that its flagship AI model, R1, can perform as well as those pricey models like OpenAI at lower cost.
“DeepSeek’s R1 is an impressive model, particularly around what they’re able to deliver for the price.” OpenAI Chief Executive Sam Altman said on X.
deepseek’s r1 is an impressive model, particularly around what they’re able to deliver for the price.
we will obviously deliver much better models and also it’s legit invigorating to have a new competitor! we will pull up some releases.
— Sam Altman (@sama) January 28, 2025
DeepSeek’s model uses Nvidia H800, a chip that’s far less expensive than the ones major U.S. large language model builders are using.
This has pressured major AI players, led by chipmaker Nvidia (NVDA) , because it threatens demand for the company’s high-margin, high-end GPUs, a key revenue growth driver.
Nvidia shares plummeted nearly 17% on Monday, rebounded 9% on Tuesday and are down 5% in recent Wednesday trading. Nvidia is down more than 10% year-to-date.
This tumble might exactly be what believers needed.
Nvidia is down more than 10% year-to-date.
Has anything changed regarding Nvidia?
Wall Street veteran Chris Versace just bought more Nvidia shares after the selloff.
“We like to take advantage of opportunities when they present themselves, and as we continue to read and have conversations about DeepSeek, it is increasingly evident the market is overreacting,” Versace opined on TheStreet Pro.
Related: Top analyst revisits Nvidia stock price target amid DeepSeek threat
“Part of this stems from DeepSeek previewing its AI model in November of last year, which means it was already a known entity in AI circles last week when Stargate AI was announced, and Meta telegraphed its sizable capital spending increase for this year,” he said.
“That, along with concerns over data privacy, security and other factors tied to DeepSeek, suggests the market is overreacting to today’s headlines.”
Versace just upped the Nvidia holdings by 10% at $118.53 a share for TheStreet Pro’s portfolio. Nvidia accounts for 3.7% of the portfolio.
Versace’s career began in the 1990s. He first bought NVDA shares last February and added to the position six times (including this one), with the prior one in May 2024.
His average gain on Nvidia shares is 41%.
His recent purchase comes after selling some shares at $144.56 after Nvidia’s Consumer Electronics Show event. He said the selling was “to lock in a slice of tremendous gains.”
Analysts mixed on Nvidia after DeepSeek release
Several analysts updated their views on Nvidia shares after the DeepSeek breakout.
Investment firm Wedbush views the selloff on Monday as a “golden buying opportunity.”
“There is only one chip company in the world launching autonomous, robotics, and broader AI use cases, and that is Nvidia,” said Wedbush analyst Daniel Ives.
JP Morgan reiterated its overweight ratings on Nvidia, Broadcom, and Marvell. Analyst Harlan Sur says the recent efficiency gains DeepSeek demonstrated will create a “faster unlock” of demand for higher-performance AI semiconductor solutions.
Related: Fidelity unveils stocks to target for the rest of 2025
As cloud providers continue to train their AI models, suppliers of custom application-specific integrated circuits, such as Broadcom (AVGO) and Marvell (MRVL) , could benefit from their cost and power advantages, according to JPMorgan.
“The bottom line is that innovation does not stop; it catalyzes new opportunities,” the analyst said.
Morgan Stanley, however, lowered its price target on Nvidia to $152 from $166 and affirmed an overweight rating, according to thefly.com.
The DeepSeek release highlights evolutionary innovations in AI, “some of which may be deflationary,” the analyst said, adding that it could bring further export controls or reduce spending enthusiasm.
More 2025 stock market forecasts
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Morgan Stanley is trimming price targets among AI semiconductor suppliers but remains positive about the group.
Related: Veteran fund manager issues dire S&P 500 warning for 2025
