No one can control the market, and no one likes to lose money, so the fear of losing money in the stock market is common. It's also common for investors to sell a stock too quickly -- regardless of what it's doing. And while I understand the desire to reduce potential losses, allowing emotions to dictate your investing decisions is rarely a good idea, especially when it's based on a perceived problem rather than a real and tangible one.
Such is the case with Nvidia (NVDA +0.84%) right now. For the last two years, Nvidia has been one of the top-performing stocks in the entire market -- thanks in large part to its critical role in the artificial intelligence (AI) movement. But on Jan. 27, shares of Nvidia cratered by 16% -- wiping out roughly $500 billion of market capitalization from the company.
Did everything just change for Nvidia, or is this sell-off emotional? Let's dig in and find out.
NASDAQ: NVDA
Key Data Points
Why did Nvidia stock crash?
Nvidia's sell-off is linked to a Chinese start-up called DeepSeek. DeepSeek has developed its own large language model (LLM), which is allegedly on par with ChatGPT from OpenAI. On the surface, this isn't surprising. But it's how the DeepSeek feat was pulled off that is causing concern.
Image source: Getty Images.
Why is DeepSeek such a big deal?
According to some reports, DeepSeek was built with a cluster of Nvidia A100 and H800 graphics processing units (GPUs). So wouldn't that be good news for Nvidia?
Well, the answer is a bit nuanced. While it could be perceived as a good thing that yet another cutting-edge AI application leverages Nvidia's hardware, the A100 and H800 are old GPUs not widely used by tech companies anymore.
Over the last few years, you may have heard management teams from Meta Platforms, Tesla, and many others specifically reference purchasing Nvidia's H100 and Blackwell architecture. These are Nvidia's newest and most expensive GPU products.
But if DeepSeek really has built something as powerful as ChatGPT using cheaper, less sophisticated infrastructure, tech companies may decide they don't need to shell out for Nvidia's latest and greatest. That's the idea that has sent investors into a full-fledged panic.
Is now an opportunity to buy the dip in Nvidia?
Dan Ives leads technology research at Wedbush Securities and has long been an Nvidia bull. Despite the news out of DeepSeek, Ives remains incredibly optimistic about Nvidia's future and just called the sell-off a "golden" opportunity to buy the dip.
No US Global 2000 is going to use a Chinese start-up DeepSeek to launch their AI infrastructure and use cases. At the end of the day there is only one chip company in the world launching autonomous, robotics, and broader AI use cases and that is Nvidia..golden buying oppy 🔥🏆🐂 https://t.co/WP0XnwTOXX
-- Dan Ives (@DivesTech) January 27, 2025
DeepSeek is not the end of Nvidia
I think investors are worried about the wrong things here.
Many hyperscalers, including Microsoft, Amazon, and Alphabet, are building custom chips in an effort to lessen their reliance on Nvidia. Microsoft and Meta are already complementing their Nvidia clusters with lower-cost MI300 accelerators from Advanced Micro Devices. So, demand for Nvidia's GPUs was likely to begin decelerating anyway.
On top of that, Nvidia has many businesses apart from its data center operation. For example, the company is a leader in gaming and is playing a huge role in the development of self-driving car software. In other words, Nvidia's future doesn't revolve around a single development. Nvidia's products power myriad AI services and the company's use cases remain broad.
Could DeepSeek lead to a slowdown for Nvidia's business? We don't know, but its GPU business was probably headed for a slowdown anyway.
Regardless, I still see the company supporting the broader AI movement for years to come. Nvidia's Blackwell architecture is rumored to be sold out for the next year, and its successor product, Rubin, could be launching as soon as this year. I doubt major enterprises will begin opting for legacy hardware over newer GPU technology.
I think we should look at Nvidia's growth instead. Demand for Blackwell and Rubin will continue, so I don't see Nvidia disappearing overnight, but its customers' capital expenditure (capex) budgets may shrink.
I think DeepSeek is nothing to worry about. I agree with Ives: Now is a great time to scoop up shares of Nvidia at a considerable discount.
