Just How Serious Was the DeepSeek Selloff? Money Pros Weigh In.
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Jan 29 2025
0mins
Source: Barron's
Market Reaction to DeepSeek's AI Development: U.S. tech stocks, particularly Nvidia, experienced significant declines following the announcement of DeepSeek's cost-effective AI model, raising concerns about the future of expensive semiconductor manufacturers and the potential for increased competition in the AI sector.
Investor Perspectives on Market Dynamics: Wealth managers expressed mixed views; some see the market reaction as an overreaction while others emphasize the importance of diversification in investment strategies, highlighting that rapid changes in technology can impact stock valuations unpredictably.
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Analyst Views on NVDA
Wall Street analysts forecast NVDA stock price to rise
41 Analyst Rating
39 Buy
1 Hold
1 Sell
Strong Buy
Current: 214.860
Low
200.00
Averages
264.97
High
352.00
Current: 214.860
Low
200.00
Averages
264.97
High
352.00
About NVDA
NVIDIA Corporation is an artificial intelligence (AI) infrastructure company. The Company is engaged in accelerated computing to help solve the challenging computational problems. Its segments include Compute & Networking and Graphics. The Compute & Networking segment includes its Data Center accelerated computing and networking platforms and AI solutions and software, and automotive platforms and autonomous and electric vehicle solutions, including software. The Graphics segment includes GeForce GPUs for gaming and personal computers (PCs), and Quadro/NVIDIA RTX GPUs for enterprise workstation graphics. Its technology stack includes the foundational NVIDIA CUDA development platform that runs on all NVIDIA GPUs, as well as hundreds of domain-specific software libraries, frameworks, algorithms, software development kits (SDKs), and application programming interfaces (APIs). Its platforms address four markets, which include Data Center, Gaming, Professional Visualization, and Automotive.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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See More
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- Dividend and Buyback: Management raised the quarterly dividend from $0.01 to $0.25 per share and authorized an additional $80 billion in share repurchases, indicating strong confidence in future growth and commitment to shareholder returns.
- Customer Concentration Risk: The top three customers accounted for 64% of accounts receivable, up from 56% in the previous quarter, which raises concerns about potential risks if demand from these key clients fluctuates.
- Stagnation in China: Nvidia recorded no data center compute revenue from China this quarter, compared to $4.6 billion in the same period last year, highlighting the impact of international market uncertainties on the company's performance.
See More
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- Promising New Platform: The upcoming Vera Rubin platform is expected to surpass the Blackwell architecture, enabling AI model training with 75% fewer GPUs and reducing inference costs by 90%, which could catalyze broader AI adoption among businesses and consumers.
- Attractive Market Valuation: Nvidia's current P/E ratio stands at 33, nearly 50% below its 10-year average of 61.7, indicating potential undervaluation; however, the stock would need to rise by 37% over the next 12 months to maintain this P/E ratio.
- Emerging Risk Factors: While Vera Rubin is poised to lower inference costs, AI companies are raising prices due to increased capital expenditures, which may blunt the platform's market impact, prompting investors to remain cautious about the uncertainties in the AI landscape.
See More
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- Overall Profit Growth: According to FactSet, 84% of S&P 500 companies exceeded earnings expectations, driving a 27.7% year-over-year profit growth in Q1, indicating signs of economic recovery despite uncertainties.
- Google Ad Revenue Acceleration: Alphabet reported a 19% year-over-year revenue growth in Q1, with advertising revenue increasing over 15%, suggesting that advertisers are ramping up spending even in a challenging economic environment, highlighting the effectiveness of Google Ads.
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See More
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- Massive IPO Potential: SpaceX is set to launch its IPO on June 12, potentially raising up to $75 billion, which could value the company between $1.75 trillion and $2 trillion, making it the largest IPO in history and drawing significant investor interest.
- Declining ARPU Trend: According to SpaceX's S-1 filing, the average revenue per user (ARPU) for Starlink is projected to drop from $99 in 2023 to $66 by 2026, a 33% decline, which may impact overall revenue growth for the company.
- Significant Customer Growth: Despite the declining ARPU, Starlink's customer base surged by 347%, increasing from 2.3 million in 2023 to 10.3 million currently, showcasing SpaceX's strong ability to attract new customers, with a total addressable market estimated at $1.6 trillion.
- Operational Efficiency Gains: SpaceX's connectivity segment saw a 120% increase in operating income to $4.4 billion in 2025, with adjusted EBITDA rising 86% to $7.1 billion, indicating substantial progress in operational efficiency despite the ARPU decline.
See More
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- Custom CPU Development: ByteDance is developing its own central processing units (CPUs) to meet the growing demands of its AI infrastructure, aiming to enhance internal operational efficiency by reducing reliance on external suppliers.
- Intensifying Market Competition: As AI models increasingly demand higher CPU performance, ByteDance's initiative aligns it with tech giants like Google, Amazon, and Microsoft, who are also developing custom CPUs to cut costs and optimize performance.
- Dual Architecture Strategy: ByteDance is exploring two chip architectures based on Arm and the open-source RISC-V instruction set to determine which design best suits its long-term data center needs, thereby mitigating future manufacturing risks.
- Price Pressure: With CPU prices from Intel and AMD rising by 10% to 35% in recent months, ByteDance is accelerating its in-house chip development to address challenges posed by supply shortages and escalating costs.
See More
ByteDance Develops Proprietary CPUs to Address Shortages
- Proprietary CPU Development: ByteDance is developing its own central processing units (CPUs) to support its growing AI infrastructure needs, aiming to mitigate reliance on external suppliers amid soaring chip prices and supply shortages.
- Intensifying Market Competition: As global hyperscalers like Google, Amazon, and Microsoft also develop custom CPUs, ByteDance's initiative signifies a rapid industry shift towards inference computing, which could impact its competitive position in the AI sector.
- Dual Architecture Strategy: ByteDance is pursuing two chip architecture tracks based on Arm and the open-source RISC-V instruction set architecture, allowing it to evaluate which design best suits its long-term data center requirements and maintain flexibility in technology choices.
- Supply Chain Challenges: With CPU prices from Intel and AMD rising by 10% to 35% in recent months, ByteDance is accelerating the development of in-house alternatives to reduce costs and ensure operational efficiency for future growth.
See More
