Does DeepSeek make NVIDIA (NVDA) a value investment?
A new Chinese-made free AI assistant could potentially make NVIDIA (NVDA) a value investment. DeepSeek, a Chinese company, recently launched R1, an AI model that claims to be 20 to 50 times cheaper than OpenAI's o1 on January 20, 2025. This launch led to some investors selling off NVIDIA stock, as AI solutions heavily rely on NVIDIA's graphics processor units (GPUs). As a result, NVIDIA's stock price dropped from $147.22 on January 23, 2025, to $116.66 on February 3, 2025, following the news about R1. However, the stock price rebounded to $125 on February 5, 2025.
Ironically, DeepSeek's R1 operates on NVIDIA's less powerful H800 chips, indicating that NVIDIA plays a significant role in making DeepSeek's technology possible. The H800 chips are less powerful processors designed to adhere to the US government's restrictions on chip exports to China. DeepSeek claims that they only spent $5.576 million (¥40.07 million) to develop V3, another AI model. This cost-effective approach could potentially generate more demand for NVIDIA's products due to the availability of cheaper AI solutions.
Why NVIDIA (NVDA) is still a great investment
Despite the emergence of DeepSeek, NVIDIA (NVDA) remains a strong stock option. NVIDIA's quarterly revenues surged by 93.61%, increasing from $18.12 billion in October 2023 to $35.08 billion in October 2024.
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