nvidia shares jump amid deepseek ban concerns
Santa Clara, Friday, 7 February 2025.
Nvidia’s stock saw an impressive rise after reports suggested that DeepSeek’s chatbot might face a ban on government devices. This development has underscored Nvidia’s strengthening role in the AI sector, leading to an upward revision of the company’s price target by analysts. The potential ban highlights increasing security concerns around AI technologies and their implications for the market. Nvidia’s association with the AI industry has been advantageous, as companies grapple with adapting technologies like DeepSeek’s. Investors have responded positively, reflecting confidence in Nvidia’s prospects in the ever-evolving AI landscape. This financial uptick hints at a promising trajectory for Nvidia, as they capitalize on market dynamics influenced by legislative actions against AI tools.
Market response to the ban
Nvidia’s stock climbed 3.08% to $128.68 on February 7, 2025, leading the Dow constituents [7]. The market reaction came amid growing scrutiny of DeepSeek, a Chinese AI company that allegedly acquired 50,000 Nvidia H100 chips through unauthorized channels [6]. This development triggered investigations by U.S. authorities and led to the implementation of a ban on DeepSeek products in government devices on February 1, 2025 [6].
Competitive dynamics in AI sector
The controversy surrounding DeepSeek has intensified focus on AI development costs and competition. Reports indicate DeepSeek developed its AI module for just $5.6 million [6], while U.S. tech giants continue massive AI investments. Meta Platform plans to spend ‘hundreds of billions’ on AI infrastructure, with $60-65 billion allocated for 2025 [5]. Alphabet projects approximately $75 billion in capital expenditure for 2025 [5].
Investment implications
Market analysts suggest the DeepSeek situation could benefit major U.S. tech companies. According to Don Townswick of Conning Asset Management, if DeepSeek’s capabilities prove less impressive than rumored, it could drive further gains in leading tech stocks [5]. However, Dakota Wealth Management notes investors are scrutinizing AI-related capital expenditures more closely [5], questioning the sustainability of such massive investments.