Jim Cramer Squashes DeepSeek Hype, Warns Of AI 'Sputnik Moment' Amid Investor Frenzy And US-China 'Inferiority Complex'

CNBC's Jim Cramer in his latest X post alluded to the Chinese artificial intelligence startup DeepSeek's hype and sneered at the politicization of the development, comparing it to the 1957 Sputnik moment, when the Soviet Union launched the first artificial Earth satellite, triggering a Space Race.

What Happened: Cramer, in his post, indicated that the public discourse around AI advancements will inevitably become politicized, with accusations of falling behind and calls for increased government intervention.

The post implies that fear of losing out could drive investors to pour money into AI companies, even if they are skeptical of their true potential.

I fully expect our inferiority complex and a belief that Nvidia was all smoke and mirrors, will cause people to hit the bid, Nvidia and all the others. They have to, they fear "sputnik." Yes, let's politicize the whole thing
— Jim Cramer (@jimcramer) January 28, 2025

In another post, Cramer highlights the U.S. competition and a perceived "inferiority complex" concerning the People's Republic of China. According to him, investor satisfaction and belief in Deepseek could be wrong and it could be “hallucinating" or providing inaccurate information.

I am glad you all are satisfied with Deepseek. Can it be the next model? I think the thing is hallucinating like mad. I see the same thing i always see: our inferiority complex v. the PRC, how much smarter and better they are. Same old Same old, We are idiots they are smart……
— Jim Cramer (@jimcramer) January 28, 2025

Why It Matters: DeepSeek’s cost-effective performance triggered a selloff in semiconductor stocks on Monday. Nvidia Corporation's NVDA led the declines by falling 17% on Monday, eroding $593 billion in market capitalization.

"To me, it's an overreaction," Fundstrat Global Advisors‘ head of research Tom Lee told CNBC's "Closing Bell," comparing the drop to Nvidia's March 2020 decline that proved to be a significant entry point for investors.

Similarly, Subho Moulik, the founder and CEO of Appreciate told Benzinga, "The sudden emergence of DeepSeek is a Sputnik-like moment for the U.S. and potentially undermines U.S. AI exceptionalism, but we see yesterday's panic selling to be overdramatic."

Moulik said, "It's not just Nvidia, the other semicaps that took a battering in the markets – Broadcom Inc AVGO and Micron Technology Inc MU – can be an interesting buy on dip."

Price Action: Nvidia’s stock was up 2.48% in the premarket trading, whereas, the exchange-traded fund tracking Nasdaq 100, Invesco QQQ Trust, Series 1 QQQ was up 0.25%.

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