Nvidia, Meta, and Microsoft stocks are facing significant declines following the introduction of DeepSeek's open-source AI models, reported to compete with established technologies like ChatGPT at substantially reduced costs. Nvidia shares dropped 13% in premarket trading, reflecting concerns over long-term hardware demand. Meta and Microsoft were also pressured by fears of heightened competition in the AI space. The developments highlight the importance of innovation and adaptation in the AI industry. The situation unfolds further as market reactions take shape.
Nvidia, Meta, and Microsoft stocks experienced significant declines in premarket trading as the launch of DeepSeek's open-source AI models disrupted the competitive landscape. The market reactions were swift and severe, with Nvidia shares dropping by 13%, Meta Platforms (NASDAQ:META) stock impacted, and Microsoft stock also affected.
DeepSeek's new models, which claim to match the performance of established rivals like ChatGPT at a fraction of the cost, have raised questions about the necessity of high capital expenditures on AI infrastructure, unsettling investors across the tech sector. This development also highlights the shifting dynamics in the AI landscape, potentially impacting companies like Nvidia, whose stock is tied to GPU demand for AI computing.
Nvidia's stock decline was significant, reflecting concerns about the long-term demand for its hardware in a changing AI competition landscape. Investor concerns intensified as the launch of DeepSeek's models created doubt over future spending on AI infrastructure by US tech companies. Bernstein analysts, however, maintained "outperform" ratings for Nvidia, considering the market reaction to be overblown. They argue that the innovation brought by DeepSeek could help optimize existing hardware rather than render it obsolete.
Meta's stock also felt the pressure as DeepSeek's models were noted to be impressive competitors to Meta's AI products. Despite this, Meta's AI infrastructure needs are expected to remain robust, as the company continues to invest heavily in its own AI capabilities.
Microsoft, a major player in AI through its investments in OpenAI, saw its stock impacted by the broader market reaction. The launch of DeepSeek's open-source models has raised concerns about the future of AI infrastructure investments, but analysts believe Microsoft's long-term AI prospects remain strong.
The tech-heavy Nasdaq futures slumped sharply, reflecting broader Wall Street apprehension. Bernstein analysts emphasize that the AI industry requires innovations like DeepSeek to progress, as current model cost trajectories are unsustainable.
They highlight that the need for increased AI computing capacity will likely absorb any new capacity, supporting long-term growth despite short-term market volatility. The introduction of DeepSeek's models underscores the necessity for continuous innovation in AI, which could involve integrating or competing with such technologies to remain relevant.
