Monday, January 27, was a veritable bloodbath in the financial markets — one in which Nvidia (NASDAQ: NVDA) was among the hardest-hit companies.
Nvidia stock closed on Friday, January 24, at a price of $142.02 — by the end of the next trading day, it had receded by 14.94% down to $120.80. In the after-hours trading session, it even dipped below the crucial $120 support level — all in all, Nvidia lost almost $600 billion in market capitalization, making this the biggest one-day loss of any company in U.S. history.
The wider tech and semiconductor selloff was caused by Chinese AI startup DeepSeek, whose open-source artificial intelligence (AI) models helped make it the top-rated free application in the United States.
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China’s overnight entry into the AI space sent shockwaves through the markets based on two factors — one, the fact that it costs significantly less to run DeepSeek, and two, that the entire development of the model reportedly cost just a fraction of what its western counterparts cost.
If a competitive AI model — and benchmarks suggest that DeepSeek’s most advanced model is, can be built and trained with relatively little in the way of capital expenditures (and without using state-of-the-art GPUs), then Nvidia, as well as the wider AI market, are in deep trouble.
Nvidia stock is currently trading at the same levels it did in early October of 2024 — having effectively lost months of upward momentum. As steep as this latest drop has been, many are worried that it is only the beginning of a more severe pullback — perhaps even below the $100 mark.
Nvidia stock likely won’t crash below $100 — or even to $100
Despite the sharp decline, several noted market analysts have expressed optimism regarding Nvidia’s outlook going forward. Citigroup (NYSE: C) researcher Atif Malik reiterated a prior ‘Buy’ rating on Monday, with a $175 price target. On the same day, C.J. Muse of Cantor Fitzgerald reaffirmed his ‘Overweight’ rating, and set a $200 price target.
Both analysts opined that recent capital expenditure developments, such as Project Stargate, and the fact that high-end GPUs still provide the best value for AI companies at scale, will serve to shield Nvidia stock from any long-term pullbacks.
To boot, numerous market commentators have pointed to Jevons paradox, including the CEO of Microsoft (NASDAQ: MSFT) — a phenomenon where, as efficiency increases, overall demand increases in tandem, as a potential bullish pathway.
In addition, in the premarket trading session on Tuesday, January 28, the price of an NVDA share climbed to $124.34, marking a 4.86% recovery.
For now, at least, the downward momentum appears to have stopped. To reach a price of $100, Nvidia stock would have to see a 19.57% decrease from current prices.
That is very unlikely to happen in the near term — although readers would do well to remember that the staggering stock market wipeout we’ve seen was caused by DeepSeek’s debut on the world stage — and that the ambitious Chinese startup could very well cause further disruptions down the line.
Featured image via Shutterstock
