TL;DR

  • Nvidia stock drops 11% in premarket trading amid competition from Chinese AI startup DeepSeek.
  • DeepSeek is successfully releasing open-sourced AI models at lower costs, challenging U.S. products.
  • The competition raises concerns about reduced demand for Nvidia's chips as DeepSeek scales its capabilities.

Nvidia stock is nosediving in premarket trading on Monday, down 11% at the time of writing at $126.84.

The stock’s fall comes amid the rise of DeepSeek as a challenger to U.S. generative AI products.

The Chinese generative AI startup is releasing open-sourced AI models at a substantially-reduced cost and still manage to rival the benchmark of top models built in the United States, including the OpenAI o1.

DeepSeek is said to be utilizing Nvidia H800 chips — the expectedly-muted versions of the H100 for training the models and in a much lesser quantity than the number of chips utilized by say, OpenAI.

The export of top-tier chips from U.S. and allied countries to China is heavily regulated and restricted.

Yet despite this, DeepSeek’s massive success in building out top models presents a niggle to Nvidia.

The Jensen Huang-led company has been seeing its stock boom — up roughly 900% since the launch of ChatGPT — on the premise that it would among the biggest beneficiaries of the AI boom, with its GPUs being in humongous demand that just can’t simply be met.

The fear after the massive success of DeepSeek and its R1 thinking model on a shoestring budget (comparing as far as AI models go) is that Nvidia could see the demand for its chips lessen if the Chinese company’s handbook could be replicated.

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