Nvidia Stock Recovery: A Glimmer of Hope After DeepSeek AI Frenzy

Nvidia's stock price has begun to recover after a near $600 billion loss prompted by the DeepSeek AI frenzy. The company's shares tumbled nearly 17% on Monday, January 28, 2025, marking the largest one-day drop since the Covid-19 crash in March 2020. The sell-off wiped about $589 billion from Nvidia's market cap, the largest loss in history, as investors grappled with the implications of DeepSeek's AI model on the demand for the company's high-end GPUs.



The release of DeepSeek's AI model, R1, raised questions about the computing power needed to develop AI systems and the demand for Nvidia's GPUs. The model, developed using fewer and less powerful chips than its U.S. counterparts, has led investors to question whether the high spending on Nvidia's AI systems was necessary and why it would continue. This uncertainty has led to a reevaluation of Nvidia's role in the AI industry and its long-term prospects.

However, Nvidia's stock price has begun to recover, with shares gaining 31% over eight trading sessions and approaching its all-time closing high of $135.58 set on June 18, 2024. The recovery has been driven by a combination of factors, including positive analyst outlooks, robust earnings expectations, retail investor demand, and technical analysis.

Positive analyst outlooks from Wall Street firms such as Goldman Sachs, Bank of America, UBS, and others have helped boost investor confidence in Nvidia. These firms have expressed enthusiasm about the company's prospects, citing robust demand from cloud service providers (CSPs) and the potential for outperformance by Nvidia's data center segment. Additionally, Nvidia is scheduled to release its eagerly anticipated quarterly earnings report on August 28, 2025, which could further boost investor confidence if the company continues to blow past increasingly lofty market expectations.

Retail investor demand has also played a significant role in Nvidia's stock price recovery. The recovery has occurred on below-average volume, indicating that the move may be driven by retail investors rather than larger market participants. Retail investors often drive stock prices higher through increased demand, and their enthusiasm for Nvidia's prospects has contributed to the company's recent gains.

Technical analysis also suggests that Nvidia's stock price recovery may be sustainable. The stock has encountered support at $116 and $97, while potential selling pressure could be seen at $136 and near a bars pattern price target around $152. As long as the stock remains above support levels, the recovery trend may continue.



However, it is essential to remain cautious about Nvidia's long-term prospects in the face of increasing competition from AI startups like DeepSeek. The emergence of more efficient and cost-effective AI solutions could lead to a reduction in demand for Nvidia's GPUs and a shift in the AI industry's focus towards more efficient and resource-friendly alternatives.

In conclusion, Nvidia's stock price recovery after the DeepSeek AI frenzy is a glimmer of hope for the company's long-term prospects. However, investors must remain cautious and monitor the company's earnings performance, the broader market sentiment, and its ability to maintain its competitive edge in the face of increasing competition from AI startups. As DeepSeek and other AI startups continue to innovate, Nvidia will need to adapt and stay ahead of the competition to maintain its stock price recovery.