TLDR:
- NVIDIA’s stock is currently trading 12% below its all-time high following a January selloff triggered by DeepSeek’s AI model announcement
- Major tech companies plan massive capital expenditures for 2025: Amazon ($100B), Google ($75B), and Meta ($60-65B), indicating strong continued demand for NVIDIA’s GPUs
- DeepSeek claimed to train its AI model for just $5.6M using older NVIDIA GPUs, raising concerns about future GPU demand
- Google CEO Sundar Pichai noted a shift in computing power allocation from training to inference, suggesting sustained demand for NVIDIA’s hardware
- Wall Street analysts project NVIDIA’s FY2026 revenue could reach $196B, representing 52% growth
NVIDIA’s stock, currently trading at $138.85, sits 12% below its all-time high following a January selloff triggered by news from Chinese AI startup DeepSeek.
The company’s shares faced pressure after DeepSeek announced it had trained a competitive AI model using older NVIDIA GPUs at a fraction of the cost typically associated with such developments.
DeepSeek reported training costs of $5.6 million, excluding an estimated $500 million in chips and infrastructure. This revelation sparked concerns about potential reduced demand for NVIDIA’s high-end graphics processing units, which have been the preferred hardware for AI model development.
However, recent announcements from major technology companies suggest these concerns may be premature. Amazon leads the pack with planned capital expenditures of approximately $100 billion for 2025, followed by Google’s parent company Alphabet at $75 billion, and Meta Platforms projecting $60-65 billion.
The substantial increase in spending is particularly notable in Alphabet’s case, rising from $52 billion in 2024 to $75 billion in 2025. Company officials have indicated that most of these funds will be directed toward data center infrastructure and chips.
Sundar Pichai
Google CEO Sundar Pichai addressed AI computing requirements during a recent earnings call. He noted a three-year trend showing increased allocation of computing power toward inference rather than training, suggesting sustained demand for NVIDIA’s hardware.
Meta Platforms CEO Mark Zuckerberg echoed these sentiments, stating that reduced training workloads won’t necessarily translate to decreased chip requirements, as computing capacity is being redirected to inference processes.
Wall Street analysts remain optimistic about NVIDIA’s growth trajectory. Current projections suggest the company could achieve revenue of $196 billion in fiscal year 2026, representing a 52% increase.
NVIDIA’s latest financial results support these positive outlooks. The company expects to report total revenue of $128.6 billion for fiscal year 2025, marking a 112% increase from the previous year. Approximately 88% of this revenue is attributed to its data center segment, driven by GPU sales.
DeepSeek’s efficiency gains stem from innovative software approaches, including algorithm optimization and a technique called distillation, which leverages existing AI models to train new ones. The company reportedly used OpenAI’s GPT-4 models to train its DeepSeek R1, prompting accusations from OpenAI about unauthorized use of their technology.
While DeepSeek achieved these results using older H100 GPUs due to U.S. export restrictions, NVIDIA’s newest GB200 GPU offers up to 30 times faster AI inference speeds. This hardware began shipping to customers in late 2024, with demand exceeding available supply.
Looking at NVIDIA’s stock performance history, previous periods of similar valuations have yielded positive returns. The last time the stock traded at comparable levels was in August 2024, after which it rose approximately 25%.
The stock’s current forward price-to-earnings ratio is notably low compared to recent history. When NVIDIA last traded below 30 times forward earnings in May 2024, the stock subsequently gained nearly 60%.
NVIDIA’s revenue growth rate, while slowing from previous quarters, remains strong at 94%. Wall Street forecasts suggest 72% growth for Q3 FY 2025.
The company plans to report its fiscal 2025 financial results on February 26, which will provide additional clarity on its performance and outlook.
