Nvidia Shares Dip: What's Behind the Recent Slump?

Nvidia's shares have taken a tumble recently, with the stock price dropping by 4.5% as of noon ET on Monday, January 27, 2025. This decline comes amidst a broader market sentiment shift, with the S&P 500 and Nasdaq Composite indices also slipping. However, Nvidia's earnings report, released on Wednesday, February 26, 2025, may have contributed to investor concerns. Although the company reported record quarterly revenue of $38.32 billion, up 73% year-over-year, and net income of $21.08 billion, up from $12.84 billion in the same quarter of the previous year, the market may have been expecting even stronger results given the high expectations and bullish outlook.

One factor that has raised concerns among investors is the success of an AI chatbot called DeepSeek, which creators claim only used cheaper versions of nvidia chips. The chatbot, developed by Chinese tech startup DeepSeek, has become the number one downloaded free app on Apple's App Store and has been praised for its advanced "reasoning" skills. Although the claim that the model was created using earlier, less advanced versions of Nvidia chips has been disputed, it still made investors question the necessity of purchasing the company's high-end products.

Nvidia's CEO, Jensen Huang, has addressed these concerns by stating that the company's chips are used for both training and inference in AI applications. While the DeepSeek chatbot may have used cheaper chips for training, the company's high-end products are still necessary for inference, which is the process of using a trained model to generate responses. Huang also noted that next-generation AI algorithms could require millions of times the current amount of computing capacity, which would further increase the demand for Nvidia's high-end products.

Despite the recent dip in Nvidia's share price, the company's data center business has seen significant growth over the past two years, with revenue increasing about tenfold. The company's chips are used by major cloud service providers such as AWS, Google Cloud Platform, and Microsoft Azure, which are bringing NVIDIA® GB200 systems to cloud regions around the world to meet surging customer demand for AI. This growth in the data center business, along with the company's partnerships with industry leaders in genomics, drug discovery, and healthcare, demonstrates the continued demand for Nvidia's high-end products.



In conclusion, Nvidia's recent share price decline can be attributed to a combination of factors, including market sentiment, earnings report expectations, and investor concerns about the company's high-end products in light of the DeepSeek AI chatbot's success. However, the company's data center business and partnerships with industry leaders demonstrate the continued demand for its products. Nvidia's CEO has also addressed investor concerns by highlighting the continued need for Nvidia's high-end products in AI inference and the potential for increased demand in the future. Investors should remain cautious but optimistic about Nvidia's long-term growth prospects.