Nvidia’s shares could face further declines after its U.S.-based rival reported a historic one-day loss in market value. Meanwhile, Chinese startup DeepSeek has raised concerns about how much big tech companies will invest in AI, potentially hurting Nvidia, a key AI chipmaker. Portfolio manager Dan Niles expressed caution, warning that the stock might not have reached its bottom after Monday’s drop.
Monday’s drop saw Nvidia shares fall 16.9%, as DeepSeek claimed its free, open-source large language model was built in just two months for $6 million, a fraction of costs faced by major players like Amazon and Microsoft. This development has sparked fears about AI investment trends among big tech companies.
Niles noted that while Nvidia remains the undisputed leader, investors should be cautious about assumptions regarding its future recoveries. He emphasized that recovery could still face significant challenges, with estimates suggesting a potential 50% revenue growth versus 20-30%.
Despite DeepSeek’s impact, Nvidia welcomed the emergence of AI competition in China, calling it an “excellent AI advancement.” However, Niles is closely monitoring whether this development could disrupt ties between major players like Microsoft, OpenAI, and Nvidia.
Microsoft has been a driving force behind the generative AI boom, pouring nearly $14 billion into AI startups. Despite being the largest spender on AI and Nvidia’s biggest customer, Niles expressed concern over potential changes in Microsoft’s capital expenditures (CapEx) growth rate, from 70-80% to flat by June.
Niles’ analysis highlights the importance of evaluating the return on investment for companies like Microsoft as CapEx trends remain uncertain. The developments underscore the risks and uncertainties surrounding AI-driven market dynamics.
Source: https://www.cnbc.com/2025/01/29/portfolio-manager-pours-cold-water-on-nvidias-stock-bounce-back-.html