Deepseek, a start-up of Chinese artificial intelligence (AI), sends shock waves in the American technological sector by demonstrating its latest AI assistant, which achieves comparable performance or even exceeding some of the best chatbots in the world.
The botter here is that Deepseek would have accomplished this using a much less lower calculation power, based on less advanced ia chips – in particular – in particular – Nvidia‘s (NVDA -3.67%)) The advanced GPUs, which are generally considered essential for such tasks.
This evolution suggests a potentially disruptive method to develop important language models (LLM), offering a more effective alternative to current strategies. He raises questions on future infrastructure investments and the demand for AI chips.
The market reaction was rapid: at that time, Nvidia’s actions plunged more than 22% compared to its recent peak, with similar declines in other AI technology actions.
Let’s explore what the emergence of Deepseek could mean for Nvidia and how it could affect investors’ portfolios.
Innovation behind the success of Deepseek
Artificial intelligence is not only a major theme of technology, but also a national security problem, given its central role in fields such as data analysis, intelligence and military applications. This has led the United States to impose severe prohibitions or restrictions on exporting high-end technologies, such as specialized AI semiconductors, to China since 2023, aimed at slowing down the country’s technological progress and protect the crucial supply chains.
Despite these constraints, Deepseek managed to develop AI models like Deepseek-V3 and Deepseek-R1 with advanced capacity with a training budget reported about $ 6 million. His white paper describes an innovative approach which combines software ingenuity with new training techniques to maximize the potential of older NVIDIA GPUs, going beyond their initial capacities.
Deepseek models have shown impressive results alongside Openai cutting edge alternatives, AlphabetAnd Meta-platforms In the references for problem solving, mathematical reasoning, coding and general knowledge. The AI Deepseek assistant quickly went up to become the most downloaded free application on the Apple App Store in the United States, demonstrating significant traction of the market and consumer acceptance.
Deepseek’s disruptive influence is also underlined by its open source platform, which makes the code accessible to the public, allowing businesses and developers to personalize AI models without incurring high costs of proprietary systems. For those looking to integrate the most advanced Deepseek models into the existing technological infrastructure via an application programming interface (API), the company would offer commercial prices which are significantly lower than those of its competitors.
Image source: Getty Images.
Implications for Nvidia
The emergence of Deepseek has multiple implications for the wider technological sector. Given the initial sale, the market has interpreted this development as in a decisively negative way, probably based on a concern that new methods of development of AI could reduce the demand for advanced and expensive equipment and reduces the competitive moats of leaders Established.
That being said, the impact on Nvidia can be more nuanced because it seems that the new generation AI chips, including the Blackwell GPU architecture from Nvidia, are essential to push the limits of high performance computer science.
If Deepseek has managed to break the IA performance references with inherited equipment, its methods towards calculation efficiency implemented by other technological players could make NVIDIA high -end products. This scenario could help extend the AI market by opening new uses that could become profitable while accelerating the calendar to future breakthroughs such as applications of artificial general intelligence (AG) as an engine of demand for NVIDIA.
On the other hand, it is also clear that Deepseek introduced a new layer of complexity concerning Nvidia’s growth track. According to Wall Street analysts monitored by Yahoo! Finance, the flea manufacturer is expected to reach $ 197 billion in revenue during the year 2026, which ends in January 2026, which results in a 51% increase in profit per share (BPA) to $ 4.45 . Any sign that customers rotate far from large orders, even on the sidelines, would undermine these prospects for profits and put pressure on the stock.
The next fourth quarter report and the results of the fourth quarter of the company, which should be published on February 26, will provide the CEO of Nvidia, Jensen Huang and Hist Eam, the possibility of determining whether Deepseek affects the company and reassuring shareholders.
| Metric | Estimation of the analyst for the year 2025 | Estimation of the analyst for the year 2026 |
|---|---|---|
| Income | 129.2 billion dollars | 196.5 billion dollars |
| Income growth (yoy) | 112% | 52% |
| EPS | $ 2.95 | $ 4.45 |
| EPS growth (yoy) | 127% | 51% |
Data source: Yahoo! Finance. Fy = exercise. Yoy = annual.
Overview for investors
Deepseek seems to have reported a new change towards the effectiveness of AI software, highlighting the rapidly evolving landscape.
Recognizing short -term uncertainties with waiting for volatility to continue, I think investors should stay the course with Nvidia as the AI leader with a technological advantage in the equipment. Unless there is evidence that its finances are under pressure, a positive long -term perspective should support the stock, which remains well positioned to bounce back.
Randi Zuckerberg, former Director of Development of the Facebook and Sister of the CEO of Meta Platforms, Mark Zuckerberg, is a member of the board of directors of Motley Fool’s. Suzanne Frey, director of Alphabet, is a member of the board of directors of Motley Fool’s. Dan Victor has no position in any of the actions mentioned. The Motley Fool has positions and recommends the alphabet, apple, meta-plates and nvidia. The Motley Fool has a policy of disclosure.
