Why Analysts Believe Nvidia Could Benefit from DeepSeek
Nvidia’s stock has seen a challenging start to 2025, primarily due to a significant drop in share prices following the company’s latest earnings report. This decline brought the stock close to the lows it experienced back in January, after a previous sell-off fueled by concerns surrounding a competitor named DeepSeek.
On a slightly brighter note, Nvidia’s shares saw a small rebound on Friday after falling over 8% the previous Thursday. However, the stock remains about 7% lower on a weekly and yearly basis. Despite the recent struggles, many analysts continue to have a positive outlook on Nvidia. They believe that the increasing demand for artificial intelligence (AI) will support the company’s growth moving forward.
Investors have expressed some uncertainty about Nvidia’s future, especially as its stock price has increased by approximately 50% over the past year. Concerns arose following the claims made by the Chinese startup DeepSeek, which suggested that their AI technology could compete with Nvidia’s while using fewer resources and at a significantly reduced cost. Despite these worries, several analysts maintain that Nvidia is still likely to gain from the emergence of DeepSeek and the growing competitive landscape.
During a recent earnings call, Nvidia’s CEO Jensen Huang highlighted the accelerating demand for AI models. He especially noted the impact of DeepSeek’s R1 model, which he stated has sparked a lot of excitement among AI developers globally. Huang mentioned that “almost every AI developer” is either using R1 or integrating parts of DeepSeek’s innovations into their own technologies. He argued that rather than reducing the need for advanced chips, the advancements in AI technology will likely require even more computing power, putting Nvidia in a strong position for future growth.
Following Huang’s comments, analysts from both Citi and JPMorgan expressed confidence, feeling reassured about Nvidia’s prospects in light of DeepSeek’s developments and anticipated future computing needs. Analysts from Wedbush also pointed out that they believe Nvidia will ultimately benefit from the innovations brought by DeepSeek.
Moreover, analysts from Bank of America suggested that the competition from Chinese companies like DeepSeek could push American firms, including Nvidia, to accelerate their AI advancements rather than cut back on spending. They noted that during recent earnings calls, several major clients of Nvidia, including Meta, Microsoft, Amazon, and Alphabet (Google’s parent company), announced plans to increase their investments in AI initiatives. This indicates a growing commitment to AI technology among leading tech companies, which may provide further opportunities for Nvidia.
In summary, while Nvidia has faced some challenges recently with its stock performance, the company maintains a strong outlook due to the ongoing demand for AI technology. Analysts continue to show optimism, suggesting that the innovations from emerging competitors may present opportunities rather than threats. With substantial investments from major tech firms like Meta and Microsoft, Nvidia seems well-positioned to navigate the evolving landscape of artificial intelligence.
