Nvidia Shorts Made a Killing on the DeepSeek Drop. It May Not Last.

Nvidia shorts made a killing on Monday, January 28, 2025, as the company's stock price plummeted following the release of DeepSeek's AI models. The Chinese startup's launch of low-cost, high-performance AI models spooked Wall Street, leading to a massive sell-off in Nvidia shares. Traders betting against Nvidia earned profits of about $6.6 billion, the biggest single-day move ever on the stock, according to data analytics firm Ortex. Nvidia saw $593 billion wiped off its market value, the largest single-session loss ever for any company.

The sell-off was sparked by concerns that DeepSeek's AI models, which are at par or better than industry-leading models in the United States, could significantly reduce demand for Nvidia's high-end GPUs. Traders betting against other AI-related stocks, such as Broadcom, Super Micro, Equinix, and Vistra, also profited from the sell-off, with combined profits of over $900 million.



However, the recent gains made by Nvidia shorts may not last, as the market begins to reassess the true impact of DeepSeek's AI models. While the models do appear to be more cost-effective and efficient, it remains to be seen whether they will completely replace the need for high-end GPUs in the long term. Additionally, the market may have overreacted to the news, leading to a potential rebound in Nvidia's stock price.

Analysts at Cantor wrote in a report that the release of DeepSeek's latest technology has caused "great angst as to the impact for compute demand, and therefore, fears of peak spending on GPUs." However, they also noted that advancements in AI are likely to lead to increased demand for computing power, rather than less. Other analysts, such as those at Jefferies, have expressed concerns that the success of DeepSeek's models could lead to a refocus on efficiency and ROI, potentially reducing demand for computing power in the future.

In conclusion, while Nvidia shorts made a killing on the DeepSeek drop, the long-term implications for the company's stock price and market valuation remain uncertain. As the market reassesses the true impact of DeepSeek's AI models, Nvidia's stock price may rebound, or it may continue to face headwinds as investors grapple with the potential implications for the company's long-term prospects.