After appearing to recover from Monday’s DeepSeek market sell-off, semiconductor giant Nvidia (NASDAQ: NVDA) is once again experiencing a downturn as jitters over artificial intelligence (AI) spending set in amid the earning season.
The stock continued its decline during the January 29 session, trading at $122.95 as of press time, dropping almost 5% in the last 24 hours. On the weekly chart, NVDA has plunged over 15%.
During the current session, the drop saw Nvidia erase about $200 billion in market capitalization, elevating fears of a possible AI bubble burst. The January chaos saw Nvidia erase a whopping $589 billion in market capitalization.
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Indeed, Nvidia’s performance contrasts European AI chip giant ASML, whose stock rose on Wednesday after CEO Christophe Fouquet praised DeepSeek as “good news” for the semiconductor sector.
Why Nvidia stock is struggling
From a broader scale, Nvidia’s volatility was triggered by the rise of DeepSeek, a Chinese AI startup that launched a free AI assistant. The tool has quickly surpassed OpenAI’s ChatGPT in popularity on Apple’s U.S. App Store.
The startup alleged that DeepSeek’s AI model was cost-effective, requiring training on fewer resources while achieving performance comparable to industry titans such as ChatGPT.
This aspect challenges the prevailing belief that China lags behind the U.S. in artificial intelligence development. Notably, Nvidia has dominated the market due to its high-performing AI chips. DeepSeek’s cost-effectiveness claims have elevated concerns that major technology companies might cut spending on AI infrastructure.
The Wednesday sell-off stems from concerns regarding AI spending guidance from technology giants reporting their Q4 2024 earnings. The markets are bracing for earnings reports from Microsoft (NASDAQ: MSFT) and Meta Platforms (NASDAQ: META).
These reports are expected to provide insights into AI spending trends and potential impacts on Nvidia’s business.
Nvidia’s reliance on major tech companies as customers further heightens the uncertainty, as any slowdown in AI infrastructure spending could directly affect its revenue growth.
Adding to investor worries, Microsoft recently stated that it is not facing a “chip supply constraint.” This statement has led to speculation that demand for Nvidia’s chips may not be as urgent as previously believed.
Buying NVDA stock in the dip
Despite the sell-off, retail investors have been actively buying Nvidia shares, who purchased the January 27 dip, splashing a net $562.2 million worth of NVDA stock.
This figure marked the largest single-day retail investment in the company. However, this influx of retail investment may not be enough to counteract broader market pressures and concerns over Nvidia’s long-term competitive position.
Featured image via Shutterstock
