Wall Street analysts rerated NVIDIA Corp NVDA after U.S. tech stocks plunged Monday as Chinese open-source artificial intelligence platform DeepSeek made the market jittery over the AI technology investment prospects in the U.S. tech firms.
Tigress Financial analyst Ivan Feinseth upgraded Nvidia from Buy to Strong Buy and raised the price target from $170 to $220.
DA Davidson analyst Gil Luria maintained a Hold rating on Nvidia with a price target of $135.
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Tigress Financial: Nvidia continues as a core holding in the powerful AI investing theme and the industry-leading beneficiary of significant capital investment in AI development. This drives the ongoing acceleration of AI adoption across all industries and enterprises, which will continue to drive substantial revenue and cash flow growth, as well as better shareholder value creation, viewing yesterday's sell-off as a significant buying opportunity.
DeepSeek's models were trained on less advanced Nvidia chips, leading to a significant drop in the stock value. However, the capabilities of DeepSeek's R1 AI model are unknown, and there are tremendous concerns about security.
Most importantly, AI and the data centers it runs on will require a multiyear ongoing investment in buildout and development.
Nvidia will be a key beneficiary as it continues to be the number one supplier of AI-driving GPUs and introduces more advanced and powerful GPUs, including its current Blackwell line of processors and the upcoming Vera Rubin processors.
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Expectations for aggregate AI-driven and data center development capital investment should exceed $330 billion this year, from just under $250 billion in 2024 to over $400 billion next year.
Nvidia highlighted multiple new product launches at CES 2025 in Las Vegas earlier this month.
In November, Nvidia reported another quarter of strong results. Demand for its industry-leading AI-enabling GPUs remains incredibly strong, and it continues to support the powerful AI-driven investment theme.
DA Davidson: DeepSeek R1 has just lowered the market price for best-in-class intelligence, and as a result, OpenAI is reacting costlyly. Sam Altman announced on X that OpenAI would give non-paying users "hundreds" of free queries a week to their upcoming o3-mini model.
Analyst Luria noted the cost of providing such a service for free would be in the hundreds of millions a week, with his base case assuming $677 million in inference cost per week. Luria noted the most underappreciated takeaway of R1 is the visibility of its reasoning tokens.
Another reason Luria noted sentiment shifting drastically in favor of DeepSeek over OpenAI is the inability to see o1’s reasoning tokens despite paying for them at the $60 per million token cost.
DeepSeek already released a leading text-to-image model, Janus-Pro-7B, that outperforms Stable Diffusion and DALL-E 3.
Thus, Luria noted OpenAI’s only move is to out-innovate open-source labs faster and find a way to lower inference costs if they are to prevail.
While Luria is aware of skepticism about DeepSeek’s training cluster size, he noted this as pure speculation with little evidence to back it.
In China, DeepSeek is not alone; Luria flagged developments from Qwen (Alibaba), Doubao (ByteDance), Kimi,and MiniMax as just some of the labs that have released leading models over the past few weeks. Luria expects a flurry of responses from American labs as a response to R1 shortly.
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