The recent DeepSeek AI sell-off has sent shockwaves across the tech and AI sectors, with Nvidia (NASDAQ: NVDA) losing over $600 billion in market value in just a matter of days. As investors panic over the implications of DeepSeek’s low-cost AI development model, CNBC’s Jim Cramer shared his take on the matter, discussing the potential fallout for AI chip stocks and the broader market.
Cramer on Nvidia: Is the AI Boom at Risk?
During an episode of CNBC’s Squawk on the Street, Cramer addressed concerns that Nvidia’s dominance in the AI GPU market might be in jeopardy if DeepSeek’s R1 model truly delivers competitive performance at a fraction of the cost. The veteran investor has long been bullish on Nvidia, but he acknowledged that the biggest concern now is whether Big Tech will continue its billion-dollar GPU spending spree or reconsider its investment strategies.
“What really matters for Nvidia is whether its orders will be cut. That’s the big question everyone is asking now,” Cramer said.
He also pointed out the potential geopolitical risks associated with DeepSeek’s Chinese origins, expressing skepticism about Western companies trusting a product that might be subject to censorship or government control.
DeepSeek vs. ChatGPT: Cramer’s Firsthand Experience
Cramer also shared his own experience using DeepSeek’s R1 AI model, comparing it with OpenAI’s ChatGPT. While he has previously praised ChatGPT for its ability to research stocks and provide insights, he was less impressed by DeepSeek.
“I tried to get it to give me Netflix’s performance from 2010, and it just said ‘I can’t do that.’ Honestly? I can do that myself,” Cramer said.
He also pointed out instances of censorship, particularly when he attempted to ask about the Tiananmen Square “Tank Man” photo. While the model initially provided information, it later retracted the response, citing a lack of available data.
“This is a Chinese product,” he remarked. “It initially answered my question, but then it took it back. That’s a huge red flag.”
Should Investors Avoid AI Stocks? Cramer’s Take
When asked whether the DeepSeek-induced sell-off was a buying opportunity for AI stocks, Cramer admitted he was uncertain.
“I don’t have the knowledge to be able to make that decision. Sometimes it’s better to say, ‘I don’t know,’” he said.
However, he warned against completely writing off AI giants like Meta (NASDAQ: META) and Microsoft (NASDAQ: MSFT), emphasizing that industry leaders like Mark Zuckerberg and Larry Ellison are still aggressively investing in AI.
“When in doubt, do you go against Zuckerberg? Do you go against Ellison? I don’t know. Sometimes it’s better to say I don’t know.”
Despite the massive sell-off, Nvidia remains the AI chip leader, with 193 hedge funds still holding positions in the company as of Q3 2024. The primary concern now is whether DeepSeek’s advancements will cause Big Tech to shift away from high-cost GPU spending, which has been a major growth driver for Nvidia.
While Cramer remains cautious, he pointed out that DeepSeek’s open-source nature could reduce demand for high-end AI chips, making companies less reliant on Nvidia’s expensive hardware.
Is the Panic Overblown?
Regarding Barrons, investment professionals, however, suggest that the upcoming earnings season could stabilize the market. Louis Navellier, Chief Investment Officer of Navellier Calculated Investing, emphasized that the demand for AI infrastructure remains robust, indicating that the recent downturn may be temporary. He stated, “I don’t see Silicon Valley being defeated.”
Analysts from Citigroup highlighted that DeepSeek’s open-source R1 model could accelerate AI product development and enhance returns on investment for companies like Meta Platforms. They noted that such efficiencies might lead to a peak in capital expenditures as product development progresses.
Final Thoughts: A Wake-Up Call for AI Investors?
In summary, while DeepSeek’s advancements have disrupted the AI sector, experts maintain that foundational demand for AI technologies remains robust. The recent sell-off has shaken investor confidence, particularly in GPU-dependent companies like Nvidia, but analysts suggest it may be an overreaction rather than a fundamental shift.
The upcoming earnings reports from major tech firms will offer deeper insights into how AI investment strategies evolve in response to DeepSeek’s low-cost model. As Jim Cramer noted, it’s still too early to determine the full impact of DeepSeek’s emergence, but it has undoubtedly introduced new competitive pressures into the AI market.
For investors, this isn’t necessarily the end of Nvidia’s dominance, but rather a wake-up call—AI development costs are changing, and companies betting on AI must adapt to a rapidly evolving landscape to maintain their edge.
Sources: Yahoo Finance, Barrons.
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Disclosure: This article does not represent investment advice. The content and materials featured on this page are for educational purposes only.
