nvidia (NVDA) 2.63%)) The semiconductor giant’s stock has fallen by more than 3% at the time of this writing, and multiple factors from the company’s management are involved in the decline, making it an unforgettable start until 2025.
For example, the previous Biden administration proposed wide limits on the sale of NVIDIA chips to foreign customers, but the impact of these restrictions was the Stargate project where $500 billion could be poured into artificial intelligence. The recent announcement has eased some degree of its own. (AI) US infrastructure This development has given Nvidia Stock a shot in the arm, but chip designers soon witness another sale.
Nvidia’s inventory fell thanks to Deepseek, but investors may have jumped over the gun
Chinese AI startup Deepseek released an inference model for R1, claiming it was trained at $5.6 million. The Deepseek model was enough to compete with Openai’s O1 Reasoning model, which spends billions of dollars on building AI infrastructure using Nvidia’s chips. Therefore, due to the low-cost nature and efficiency of the Chinese company model, Nvidia stock packaging was sent.
Investors were worried about the potential decline in demand for graphics cards used for AI training and reasoning by major cloud computing companies and governments. The semiconductor giant circulated a market capitalization of around $600 billion a day on January 27th, following Deepseek’s breakthrough. However, a report from Semiconductor Industry Analysis Company’s Semianalysis (via Tom’s Hardware) suggests that Deepseek may not reveal the actual cost of training AI models.
Semianalysis notes that Deepseek reportedly has paid $1.6 billion in hardware costs. It also adds that the Chinese startup will have access to 50,000 Nvidia’s previous generation Hopper Graphics Processing Units (GPUs), including 10,000 units of its flagship H100 processors. Semianalysis further points out that the $6 million figure highlighted by Deepseek only refers to the potential money spent on training the model.
It does not take into account other costs associated with research, data processing, model tweaking, and infrastructure costs. Given that DeepSeek has spent over $500 million on AI funding since its inception in 2023 and reportedly has its own data center, the cost of training the R1 model that sent Nvidia stock plunging can actually be higher than what’s advertised. Chinese company.
If certainly so, the investor may have pressed the panic button for the wrong reasons. But the good thing is that Nvidia’s poor start to this year means investors have a window to buy this fast-growing company through DIP. Below are three reasons why doing that could be a wise move:
3 Reasons to Buy Nvidia Now
The first reason to buy Nvidia is its rating. The expensive valuation of stocks following the incredible gatherings over the past few years has been a source of concern for investors and analysts. However, it is currently trading at a very attractive level. Nvidia’s subsequent price-to-earning (P/E) rate is 51, which is higher than the 33.4 on the Tech-equipped NASDAQ-100 index, but the 30’s earnings are lower than that.
The second reason investors should consider buying Nvidia is related to Deepseek. Assuming Deepseek’s claims are indeed true and low-cost models could lead to increased demand for AI applications.
British economist William Stanley Jevons observed in 1865 that increased efficiency in coal consumption did not reduce coal demand. Instead, it will spur the use of coal in more industries. This concept, known as Jevons Paradox, can be seen in many other applications. For example, increased fuel efficiency in vehicles reportedly increased distances as the arrival of low-cost LED bulbs tends to install more lights to reduce costs.
Therefore, efficient AI models can lead to increased demand, which is why Nvidia’s chip needs are likely to remain solid. So what Deepseek’s breakthrough claims is not necessarily a bad thing for Nvidia.
The last reason to buy Nvidia stock following the recent pullback is that the cloud computing giant is set up to continue spending more money on AI infrastructure. President Donald Trump’s $500 billion AI infrastructure push will require more chips, including those built AI data centers by Oracle, Openai, SoftBank, and Abu Dhabi-based AI investment vehicle MGX. Meanwhile, recent announcements from CEOs of Meta Platforms and Microsoft, which support higher spending on AI, also show demand for healthy AI chips.
Finally, the surge in bookings for advanced machinery sold by Dutch semiconductor equipment giant ASML provides further evidence that the appetite for advanced chips supporting AI workloads has not disappeared. Therefore, it is not surprising to see Nvidia’s fate spinning. That’s why investors should consider using the latest pullback on this AI stock, given the healthy growth they can offer over the long term.
Randi Zuckerberg, a former director of market development, Facebook spokeswoman and sister to Metaplatform CEO Mark Zuckerberg, is a member of Motley Fool’s board of directors. The harsh Chauhan has no position in any of the stock mentioned. Motley Fool has been featured and recommended in ASML, Meta Platforms, Microsoft, Nvidia, and Oracle. 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.
