Nvidia Stock: Rebounding After DeepSeek Fears, But What's Next?

Nvidia's stock price has nearly recovered from the initial sell-off triggered by the DeepSeek announcement, but investors should remain cautious as the AI landscape continues to evolve. Here's a closer look at the factors driving Nvidia's recovery and the potential challenges ahead.

1. Analyst Ratings and Price Targets: Despite the DeepSeek news, analysts have maintained a largely positive outlook on Nvidia's stock. The average analyst rating from 41 stock analysts is "Strong Buy," with a 12-month price target of $169.53, indicating a 21.61% upside from the latest price (Source: Benzinga). This consensus reflects analysts' belief that DeepSeek's impact may not be as severe as initially feared.
2. Strong Earnings Growth: Nvidia's financial performance has been robust, with revenue and earnings per share (EPS) growth expected to continue. In 2024, Nvidia's revenue is forecasted to be $131.91 billion, an increase of 116.52% from the previous year. EPS is expected to be $3.01, an increase of 152.25% from the previous year (Source: Finnhub). This growth is expected to continue in 2025, with revenue projected to reach $201.23 billion and EPS projected to be $4.51.
3. Hyperscalers' Capital Investments: Nvidia's growth is supported by hyperscalers' capital investments in data centers and AI capacity. Hyperscalers, such as Microsoft, Amazon, and Google, are investing heavily in AI infrastructure, which drives demand for Nvidia's GPUs. Nvidia's q4'25 earnings have a strong potential to outperform driven by strong data center growth and hyperscalers' continued investment in compute capacity (Source: Seeking Alpha).
4. Nvidia's Response to DeepSeek: Nvidia acknowledged DeepSeek's advancement as an "excellent AI advancement" but noted that it still requires "significant numbers of Nvidia GPUs and high-performance networking." This statement reassured investors that DeepSeek's approach would not replace Nvidia's GPUs entirely (Source: Benzinga).



However, investors should remain cautious as the AI landscape continues to evolve. Some factors to consider include:

1. DeepSeek's Long-term Impact: While Nvidia's stock price has recovered, the long-term impact of DeepSeek on Nvidia's business remains uncertain. If DeepSeek's approach gains traction and reduces the demand for Nvidia's GPUs, it could negatively impact Nvidia's stock price.
2. Market Sentiment: Market sentiment towards AI stocks and Nvidia specifically will play a significant role in determining the sustainability of the stock price recovery. Positive sentiment and analyst ratings can help drive the stock price higher, while negative sentiment and analyst downgrades can lead to a reversal in the stock price.
3. Nvidia's Earnings: Nvidia's upcoming earnings report on February 26, 2025, will be crucial in determining the sustainability of the stock price recovery. Analysts expect Nvidia's earnings to outperform, driven by strong data center growth and hyperscalers' continued investment in AI capacity (Source: Seeking Alpha). However, any surprises or disappointments in the earnings report could lead to a reversal in the stock price.

In conclusion, Nvidia's stock price recovery following the DeepSeek news can be attributed to analyst ratings, revenue and EPS growth, hyperscalers' capital investments, and Nvidia's response to DeepSeek. However, investors should remain cautious as the AI landscape continues to evolve, and the long-term impact of DeepSeek on Nvidia's business remains uncertain. The sustainability of this trend depends on Nvidia's earnings, DeepSeek's impact, and market sentiment.