nvidia bounces back amid deepseek competition jitters
Santa Clara, Wednesday, 29 January 2025.
Nvidia stock rebounded significantly after a decline triggered by competition fears from Chinese AI startup DeepSeek. The market reacted sharply to DeepSeek leveraging Nvidia’s GPU technology, causing concern about the firm’s dominant position. Despite these fears, Nvidia’s shares rose, recovering almost 9%, as investor confidence returned. This volatility underscores the market’s sensitivity to new AI innovations and their potential to disrupt established players. Nvidia’s rebound helped lift major US stock indices, including the Nasdaq, which saw over a 2% increase. This situation highlights the precarious balance between innovation risks and market stability as AI technology evolves rapidly. Nvidia remains a key player in the AI sector despite the upheavals, with observers suggesting the dip could be a buying opportunity.
Market recovery after deepseek shock
Nvidia’s stock staged a remarkable comeback, surging 8.82% after experiencing its largest single-day market value loss of nearly $600 billion [1][2]. The rebound came as investors reassessed the initial panic over Chinese AI startup DeepSeek’s low-cost AI model. The recovery helped push the Nasdaq up 2.03% and the S&P 500 up 0.92% [3].
DeepSeek’s impact on nvidia
DeepSeek’s announcement of developing an AI model using only $6 million worth of Nvidia H800 chips initially rattled markets [4]. However, Nvidia responded by stating that DeepSeek’s advancement actually demonstrates the utility of their chips in the Chinese market and could drive increased demand for Nvidia products [4]. The company emphasized that DeepSeek’s technology utilizes existing models and export-compliant computing resources [4].
Expert perspectives on market reaction
Point72 CEO Steve Cohen maintains that AI will remain a dominant theme for the next 10-20 years, though he warns of potential volatility [5]. Synovus Trust Company senior portfolio manager Daniel Morgan suggests the market’s initial reaction was excessive, noting that DeepSeek’s models primarily target mobile and PC applications rather than data centers, where Nvidia’s core profits originate [4].
Broader market implications
The incident triggered widespread tech sector movements, with major players like Microsoft rising 2.91%, Meta up 2.19%, and Apple gaining 3.65% [5]. The Philadelphia Semiconductor Index recovered with a 1.11% increase [5]. The episode highlights the market’s heightened sensitivity to AI developments and the complex dynamics between established players and emerging competitors [GPT].