Did Deepseek’s AI (AI) model actually cost less than $6 million? If so, I think big tech, which is set to spend billions this year, will be spending billions, let alone the massive $500 billion Stargate project that President Trump announced last month.
However, while Deepseek’s numbers may be heavily undervalued, a recent report suggests that the company may have spent well over $500 million on hardware. It will inevitably take time before investors can fully grasp how problematic Deepseek’s AI development is for the tech sector or how concerned they are about issues that aren’t.
In the meantime, one of the stocks that are declining in these developments is the nominal nvidia of chipmaking giants and AI. (NVDA) 0.90%)). The chip is synonymous with AI development, as it is considered important for companies developing next-generation models. News related to Deepseek have already caused significant losses to Nvidia’s market capitalization, but this could be just the beginning.
Why don’t you worry too much about the Deepseek AI model?
For top tech companies like Nvidia, Microsoft, Apple and other well-known names, it’s the best mind in technical work in the US. Proposing a Chinese startup that was launched in 2023 is not a scenario I consider very plausible to shame some of the world’s most successful and most valuable businesses.
The odds are significantly less costly for DeepSeek to develop AI models. After all, it’s not as if they audited financial statements that investors could consider to assess the true cost. Chatgpt-Maker Openai claims that Deepseek used the AI model to create a new chatbot. “We are recognizing and reviewing the indication that Deepseek may have inappropriately distilled the model.” If Deepseek relies on Openai’s models to help build its own chatbot, it certainly is. It helps explain why it is much less and why similar results can be achieved.
But for now, Deepseek is simply far more efficient and is not in a hurry to assume Big Tech is wasting billions of dollars.
This does not mean that nvidia stock is out of the forest
If it is not true that Deepseek’s AI model is actually too good and proves to be far more expensive than the company said, it doesn’t necessarily lead to a big rebound in Nvidia’s valuation. What the news related to Deepseek shed light on AI-related spending and raised the valuable question of whether companies are too aggressive in pursuing AI projects.
This could lead companies to reassess their technology needs and determine whether all of their spending is justified. And in an age where tariff threats place emphasis on the economy, it may be appealing for businesses to reduce AI-related spending, given uncertainty.
For Nvidia, a company whose value has skyrocketed due to impressive growth, slowing demand could make Chipmaker’s stock vulnerable to more fixes.
YCHARTS’ NVDA operating revenue (quarterly growth) data
Are Nvidia’s stocks still good purchases?
As of Monday, Nvidia’s shares had fallen 12% to start the new year. And based on analysts’ forecasts, it is currently trading at 28 times the future profits. This isn’t too expensive for top tech companies. However, if these forecasts go down, stock valuations don’t look as attractive as they are today.
However, if you’ve been buying stocks for a long time, loading it today may not be a bad idea. The company’s impressive profit margins, strong market position and valuation cuts could now be the best time to add Nvidia’s stock to its portfolio.
David Jagielski has no position in any of the stocks mentioned. Motley Fool has jobs at Apple, Microsoft and Nvidia and recommends. Motley Fool recommends the following options: A $395 phone at Microsoft for January 2026 length and a $405 phone to Microsoft for January 2026 short term. Motley Fools have a disclosure policy.
