Nvidia and AI Infrastructure Face Fresh Uncertainty

Financial markets were shaken on Monday as tech-heavy Nasdaq futures slumped, led by a steep decline in Nvidia (NASDAQ:NVDA). The drop follows concerns surrounding a potential shift in AI infrastructure demand after Chinese start-up DeepSeek unveiled a low-cost, energy-efficient AI model. Nvidia shares were down 11.7% in premarket U.S. trading, marking the stock’s sharpest one-day move since the March 2020 COVID-19 outbreak, if the trend holds.

Analysts at U.S. Tiger Research emphasized the uncertainty for Nvidia and related stocks, citing questions about whether AI capital expenditures in 2026 can sustain their current growth trajectory. “In a market priced for perfection, any added uncertainty will pressure Nvidia’s stock price,” they noted. However, the firm also cautioned that shorting Nvidia may be premature without further clarity, advising investors to remain on the sidelines.

DeepSeek’s Disruption Raises Broader Concerns

The market downturn followed DeepSeek’s launch of its flagship AI model, DeepSeek R1, an open-source platform that reportedly delivers performance comparable to rivals like OpenAI’s ChatGPT but at a fraction of the cost. This development has raised questions about the viability of the massive investments U.S. firms have made in AI infrastructure, which have surged into the hundreds of billions of dollars.

Bernstein analysts described the innovation as significant but tempered market fears of an AI infrastructure collapse. “DeepSeek may have reduced costs of achieving equivalent model performance by tenfold, but current cost trajectories are already increasing at a similar rate annually. Such trends are unsustainable,” the brokerage noted. They argued that DeepSeek’s models, while disruptive, could serve to enhance efficiency within the AI ecosystem rather than derail it.

Chipmakers Under Pressure but Long-Term Outlook Intact

The reaction to DeepSeek’s announcement sent ripples across the tech sector. Nvidia, widely regarded as an AI powerhouse, was hit particularly hard, while shares of Broadcom (NASDAQ:AVGO) and other semiconductor firms also faced selling pressure. The European tech index dropped 5.8%, led by chip equipment manufacturers ASML (AS:ASML) and ASM International (AS:ASMI), which saw double-digit losses.

Despite the selloff, analysts at Bernstein maintained an “outperform” rating for Nvidia and Broadcom, citing their strong long-term prospects in the AI space. They highlighted that the demand for computing capacity would continue to outpace supply as AI adoption accelerates globally.

Strategic Perspective: No Room for Doomsday Fears

Bernstein analysts pushed back against the “doomsday scenarios” circulating on social media, suggesting that innovations like DeepSeek’s are crucial for the AI sector’s evolution. They noted that enhanced efficiency in AI models could reduce the cost burden on companies while simultaneously fueling demand for higher-performance hardware.

While the immediate outlook remains clouded with uncertainty, the brokerage underscored the importance of retaining a long-term perspective. As AI adoption continues to expand, chipmakers are expected to play a vital role in meeting the infrastructure demands of tomorrow.