Nvidia shares slide 5% as China’s DeepSeek sparks questions over AI-related capex

Investing.com– NVIDIA Corporation (NASDAQ:NVDA) shares fell over 5% in 24 hour markets, RobinHood data showed on Sunday evening, amid growing questions over the need for major capital spending on artificial intelligence after the release of China’s DeepSeek. 

Nvidia slid 5.2% to an indicated $135.20, RobinHood data showed, with shares extending a 3.2% loss from Friday.

The AI darling was rattled by the release of DeepSeek R1- a large-language model that claims to rival offerings from ChatGPT and Meta (NASDAQ:META) while using a fraction of their budgets. 

DeepSeek- which is funded by Chinese quant fund High-Flyer- reportedly had access to about 50,000 of Nvidia’s H100 AI GPUs, which are from the last generation of advanced AI chips. 

DeepSeek’s release raised concerns that technology firms could adopt leaner, more capital-efficient approaches to AI development, necessitating lower amounts of capital expenditure on data centers and advanced AI chips.

Yardeni Research analysts said that while major tech firms could learn from DeepSeek to design cheaper AI systems, “it might not be a happy development for Nvidia.” 

JPMorgan analysts argued that concerns over higher AI budgets were “overdone,” adding that DeepSeek’s efficiency came more from necessity, especially in the light of strict U.S. export controls on China’s chip industry. 

Six of Wall Street’s so-called Magnificent 7 firms- which make up a bulk of Nvidia’s biggest customers- are set to report quarterly earnings this week, and are widely expected to announce increased capex in AI development.

AI giant OpenAI had last week also announced a joint $500 billion investment in U.S. AI infrastructure.