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With DeepSeek Hogging The Headlines, Is Now A Good Time to Buy the Nvidia Dip?
Nvidia’s dominance in the AI chip market took a serious hit after the debut of DeepSeek, a Chinese AI model that shocked the tech world. DeepSeek claimed to have developed an AI chatbot at a fraction of the cost compared to OpenAI and other major players. This revelation sent Nvidia’s stock tumbling 17% in a single day, erasing almost $600 billion in market capitalization, the biggest one-day market cap drop in U.S. history.
The reason? Investors feared that AI development costs were about to plummet, potentially reducing demand for Nvidia’s high-powered and expensive AI chips. DeepSeek reportedly trained its model for just $5.6 million, a number that—if accurate—would undercut the billions being spent by companies like OpenAI and Microsoft. As a result, doubts emerged about whether Nvidia’s dominance in AI infrastructure was sustainable in the long run.
The Rebound: Why Nvidia Is Bouncing Back
Despite the historic selloff, Nvidia shares rebounded nearly 9% the following day, recovering over $260 billion in market value. Analysts and investors quickly reassessed the DeepSeek panic, with many arguing that the AI revolution is far from over—and Nvidia remains at the center of it.
Several factors contributed to Nvidia’s bounce-back:
- Skepticism Over DeepSeek’s Claims: Analysts questioned whether DeepSeek’s AI model truly cost only $5.6 million to develop. Many believe the startup excluded key development expenses, making the comparison misleading.
- AI Adoption Continues: Lower AI costs could increase adoption, not reduce demand for Nvidia’s chips. More affordable AI models might encourage even more companies to enter the AI space, leading to greater GPU demand.
- Nvidia’s Strong Market Position: Nvidia still controls roughly 80% of the AI chip market. Even if DeepSeek signals cheaper AI development, companies still rely on Nvidia’s GPUs for AI training and deployment.
- Wall Street’s Support: Analysts remain overwhelmingly bullish. Of the 63 analysts covering Nvidia, 94% rate it a buy or strong buy. Tigress Financial even upgraded Nvidia to a “strong buy,” increasing its price target to $220—representing a 71% upside from current levels.
Should You Buy the Nvidia Dip?
While Nvidia has regained some lost ground, investors should proceed with caution. Not all analysts are convinced that the stock has bottomed out. Portfolio manager Dan Niles warns that Nvidia could still have further to fall, especially if AI capital expenditures slow down. If companies like Microsoft reduce their AI budgets, Nvidia’s growth rate could be impacted.
However, history suggests that buying Nvidia during periods of volatility has often been a winning strategy. The company has demonstrated resilience, bouncing back from past selloffs to hit new highs. With AI demand still strong and Nvidia maintaining a dominant market share, long-term investors may see this dip as an opportunity.
For those considering an entry, it’s important to assess risk tolerance. If AI investment spending remains robust, Nvidia could continue its upward trajectory. But if DeepSeek’s emergence signals a shift in AI economics, further volatility could follow.
Should investors take advantage of the Nvidia dip? Tell us what you think!
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