Tech stocks were sent reeling on Monday after Chinese artificial intelligence start-up DeepSeek made a claim that could potentially shake up the industry. Nvidia, a key player in AI computing, saw its stock tumble 17% in a single day, wiping out nearly $600 billion in market value. But as Wall Street took a closer look, skepticism began to creep in.
A Bold Claim, But Is It Real?
DeepSeek’s assertion that it built a high-performing AI chatbot for just $5.6 million sent shockwaves through the market. The number seemed staggeringly low, given the massive investments by companies like OpenAI, Google, and Microsoft in training advanced AI models.
Wall Street analysts weren’t buying it—at least not at face value. Stacy Rasgon, an analyst at Bernstein, dismissed the notion outright. “Did DeepSeek really ‘build OpenAI for $5M?’ Of course not,” he wrote in a note to clients, adding that the actual costs were likely much higher when factoring in development, infrastructure, and hidden expenses.
Another key point: DeepSeek’s own research paper didn’t specify the additional resources needed to develop the AI. That omission raised eyebrows. The skepticism isn’t just about money—it’s about feasibility.
Nvidia’s AI Future Still Looks Strong
The immediate reaction to DeepSeek’s claim was panic selling, with investors fearing that more efficient AI models would reduce demand for Nvidia’s expensive GPUs. But history suggests otherwise.
Economic theory, specifically Jevons Paradox, suggests that as technology becomes more efficient and cost-effective, demand actually increases. The reasoning is simple: lower costs lead to broader adoption. In the case of AI, that means more companies building more models—most of which will still rely on Nvidia’s industry-leading chips.
C.J. Muse, an analyst at Cantor Fitzgerald, reinforced this point: “Innovation is driving down cost of adoption and making AI ubiquitous. We see this progress as positive in the need for more and more compute over time (not less).”
This perspective was echoed by Tigress Financial, which upgraded Nvidia’s stock to a “strong buy” and set a price target of $220—a 71% upside from Tuesday’s close. Their reasoning? The long-term need for AI infrastructure isn’t going away.
Wall Street’s Stance: DeepSeek or Not, Nvidia Stays Dominant
Despite Monday’s bloodbath, most analysts remain bullish on Nvidia. In fact, a review of analyst ratings shows that:
- Of 63 Wall Street analysts who have weighed in on Nvidia in January, 94% still rate it as a “buy” or “strong buy.”
- Not a single analyst recommends selling the stock.
- Market fears over DeepSeek’s announcement seem to be fading as analysts look at the bigger picture.
There’s also the question of whether DeepSeek’s chatbot is truly groundbreaking. The app surged to the No.1 spot on Apple’s App Store, but questions remain about actual user engagement. Initial download numbers are strong, but reports suggest that real-world usage might not be as high as advertised.
Nvidia’s Valuation: Expensive, But Not Outrageous
Even after Monday’s selloff, Nvidia’s stock remains pricey, trading at around 50 times earnings. For traditional value investors, that might seem excessive. But compared to Nvidia’s five-year average P/E ratio of 81, it’s actually on the lower end of historical valuations.
The bigger picture? Nvidia’s stock has soared more than 2,000% over the past five years, proving that investors are willing to pay a premium for a company that dominates its space. And despite the emergence of new AI players, Nvidia’s dominance in AI computing isn’t going away anytime soon.
DeepSeek’s announcement may have rattled the market, but as Wall Street analysts digest the details, Nvidia still looks like the AI leader to beat.
