The release of DeepSeek’s R1 AI model triggered a $1 trillion tech stock sell-off, with Nvidia facing significant losses. The Chinese startup claims to have built a rival AI model for just $5.6 million, raising concerns about AI infrastructure spending and Nvidia’s long-term demand. But is the fear justified?
DeepSeek’s efficiency claims under scrutiny
DeepSeek asserts that its R1 model was trained at a fraction of the cost incurred by U.S. giants like OpenAI. However, industry experts question whether the reported figures exclude key costs such as pre-training, infrastructure, and engineering salaries-potentially pushing real expenses closer to $500 million. Additionally, speculation surrounds DeepSeek’s access to restricted Nvidia H100 chips, casting doubt on its cost-efficiency narrative.
Future of Nvidia stock: Trouble or growth opportunity?
Despite the initial sell-off, some analysts believe the market reaction is exaggerated. The Jevons Paradox suggests that as AI models become more efficient, overall demand for computing power may increase. Tech giants like OpenAI and Meta continue to invest heavily in AI infrastructure, with Meta planning $65 billion in AI spending for 2025.
Technical outlook: Key levels to watch
Nvidia has begun recovering from its early-week slump, though prices remain below key moving averages. A potential bounce could face resistance at $140.00 and $148.80, while support lies around $121.80. With AI demand still surging, Nvidia’s long-term growth story may not be over yet.
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