Nvidia (NVDA) investors who held on to the stock for the past three years are likely smiling, with a $10,000 investment worth almost $55,000 today. However, with the emergence of DeepSeek, a Chinese large language model (LLM), Nvidia’s dominance in the AI industry is under threat.
DeepSeek’s launch has brought attention to the expensive nature of training LLMs, a problem Nvidia and other American companies have been trying to solve for months. The new model demonstrated that advanced AI can be built without outrageous costs, using less advanced hardware than its rivals.
While DeepSeek is not the sole issue, it has made the problem too obvious to ignore. The report “Gen AI: Too Much Spend, Too Little Benefit” by Goldman Sachs suggests that the $1 trillion in capital expenditures tech giants are investing into generative AI hardware and development may not pay off due to technology limitations.
Nvidia focuses on making graphics processing units (GPUs) for cloud computing companies, but as start-ups fail or burn through money, chip demand may slow. The US government could intervene by restricting chip exports to China or trying to undermine DeepSeek based on intellectual property concerns.
Despite this, investors should expect Nvidia’s growth and margins to decline in the coming years as industry participants realize they don’t need its latest hardware. However, the stock’s low valuation suggests some of Nvidia’s long-term challenges are already priced in, making it a relatively affordable investment despite the risks.
Source: https://www.fool.com/investing/2025/02/02/where-will-nvidia-stock-be-in-3-years