Nvidia Climbs Nearly 3% as Analysts Say DeepSeek Could Fuel GPU Demand

Nvidia Corporation (NVDA) shares rose nearly 3% on Tuesday, as analysts weighed in on the potential impact of DeepSeek's AI advancements on the demand for graphics processing units (GPUs). The Chinese AI startup's recent announcement of a cost-effective AI model has sparked debate about the future of AI hardware demand and Nvidia's market position.



DeepSeek's R1 model, which matches or exceeds OpenAI's o1 reasoning model, was trained using a fraction of the computing resources typically required for such tasks. This has raised questions about the need for high-end GPUs in AI development and the potential for more cost-effective alternatives to emerge.

Analysts, however, remain optimistic about Nvidia's prospects. Robert Maire, president of Semiconductor Advisors, noted that DeepSeek's advancements are related to software and algorithms, not hardware. He believes that AI players are unlikely to cancel their Nvidia orders but may rethink their algorithmic approach to achieve better performance with less expensive hardware.

Harlan Sur, an analyst at JPMorgan, echoed Maire's sentiments, stating that new technology innovation cycles have historically driven increased proliferation and demand for semiconductors. He rates Broadcom, Marvell, and Nvidia stock as overweight, or buy.



Wedbush Securities analyst Daniel Ives compared DeepSeek to the ultracheap China-based e-commerce firm Temu, suggesting that the sell-off in AI stocks on Monday was a "tech AI head fake" that would be short-lived. He views the recent decline as a "golden buying opportunity" for Nvidia stock and other AI chip stocks.

Morgan Stanley analyst Joseph Moore trimmed his price target on Nvidia stock to $152 from $166 but maintained his overweight, or buy, rating. He also cut his price targets on Astera Labs, Broadcom, Marvell, and Micron Technology.

In conclusion, while DeepSeek's AI advancements have raised questions about the demand for high-end GPUs, analysts remain optimistic about Nvidia's prospects. The company's strong ecosystem advantages, including CUDA dominance, networking, and scale, as well as its strategic acquisitions and investments, position it well to maintain its market dominance in the face of emerging competition. As the AI landscape continues to evolve, Nvidia's ability to adapt and innovate will be crucial in determining its long-term success.