Nvidia’s AI dominance remains intact despite challenges from DeepSeek

After a $750-billion decline in market capitalisation due to concerns over DeepSeek's AI developments, Nvidia has faced a challenging few weeks.

While the Nasdaq has remained steady, the stock has only partially recovered, still standing six per cent below its pre-panic level.

A recent report stated concerns that demand for Nvidia's high-end chips may decline. This decline could reportedly be caused by claims from the Chinese AI startup DeepSeek, which has created a sophisticated AI model at a lower computational cost.


The report, which appeared in The Wall Street Journal, referenced recent financial results showing that Amazon, Meta, and Alphabet all expect significant increases in capital expenditures for AI infrastructure.

Tech giants still betting on Nvidia

Andy Jassy, CEO of Amazon, stated that the company would maintain its partnership with Nvidia for as long as it can foresee. In 2025, Amazon plans to invest over $100-billion, mainly in AI infrastructure.

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This is encouraging for Nvidia's earnings announcement slated for February 26, the WSJ report added, with its data-centre sector — housing most of its AI chips and services — predicted to more than double its revenue to $113 billion for the fiscal year ending in January.

Blackwell transition may cause short-term slowdown

The report mentioned that some analysts are concerned that the switch to Nvidia's new Blackwell processor family may cause a brief slowdown in growth, despite high demand.

The WSJ report cited FactSet forecasts, which predicted that data-centre revenue would increase by just $2.6 billion in Q4, compared to $4.5 billion in Q1. This would represent the weakest sequential gain since the surge in AI demand began in early 2023.

Analysts reportedly anticipate high-volume sales only in the second half of the fiscal year, despite Nvidia CEO Jensen Huang's November statement that Blackwell manufacturing was running at full speed. Due to a "air pocket" in shipments, Evercore ISI's Mark Lipacis has warned that Nvidia's April-ending quarter projection may be worse than anticipated.

Lower valuation could prove beneficial for Nvidia?

Despite the decline in its stock price, Nvidia's valuation may ultimately be a boon. Six months ago, the stock was trading at about 40 times expected earnings. Now, it is trading at 32 times, the WSJ report said.

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Despite improved growth forecasts — Nvidia's revenue is expected to increase by 53 per cent this year, compared to an average growth of 12.2 per cent for Apple, Microsoft and other tech giants — it is now cheaper than most of its mega-cap tech counterparts.

Nvidia continues to dominate the market despite DeepSeek's rise, as IT behemoths continue to spend billions on AI infrastructure.

FAQs

1. What caused Nvidia's stock to decline?
A $750 billion market capitalisation loss occurred due to concerns that Nvidia's high-end chips would face reduced demand because of DeepSeek's AI developments.


2. How are the major tech companies reacting to Nvidia's dominance in AI?
Despite DeepSeek's claims, Amazon, Meta and Alphabet have reaffirmed their strong alliances with Nvidia and increased their investments in AI infrastructure.