Why Is Nvidia Stock Going Down Today: Nvidia Corporation (NASDAQ:NVDA), once the brightest star in the technology sector, is facing a huge decline today. Nvidia Shares have fallen more than 17.4% in Monday’s trading session, which is the biggest decline since the technology sector sell-off in August.
This decline is not just a simple fluctuation of the stock market. There is an important reason behind it-Chinese AI Startup deepSeek’s new AI model, R1. Let’s know what is the reason for this huge decline in Nvidia’s stocks and why it is so important.
DeepSeek R1: Challenge for Nvidia
DeepSeek has recently introduced a new open-source AI model called DeepSeek R1, which has surprised the model is not only better than the State-of-the-art (and expensive) AI models in its performance, but it also cost very little to develop.
- While trading large AI models requires thousands of GPUs and millions of dollars, DeepSeek R1 cost just $12 million to develop.
- moreover, this model works brilliantly even on fewer GPUs.
Impact on Nvidia
Nvidia was till now making massive profits from the demand for its AI GPUs.
- The Company’s A100 GPUs were considered essential for large AI systems.
- Nvidia Gave a return of up to 180% in 2024, as A.I. companies lined up to buy its chips.
But DeepSeek R1 has Changed this picture.
- less GPU Required: Nvidia’s older and cheaper H800 GPUs were used to train DeepSeek R1. This means that the need for expensive H100 GPUs may now be reduced.
- Open-Source Model: DeepSeek has kept R1 open-source, which means other companies can copy it.
This will further reduce the cost of developing AI models, which may reduce the demand for Nvidia’s products. - Change in focus on Computing power: Big firms like Jefferies say that companies will now focus on efficiency and ROI (return on investment). That is, small and cheap options will be adopted instead of big and expensive AI systems.
Wall Street’s reaction
Wall Street is currently divided about this situation.
- Jefferies believes that this decline can continue for a long time, because the focus of the AI industry is now shifting from expensive GPUs to cheap solutions.
- At the same time, citi is confident that Nvidia will maintain its hold in the future as well, because the company’s technical capabilities are still excellent.
However, one thing is clear—This happened at the wrong time for Nvidia.
The company was about to launch its new Blackwell series chips, which were already sold out. But if companies start adopting cheaper GPUs, then this product of Nvidia may not prove to be as beneficial.
Is it just a panic or something else?
At the moment it is difficult to say whether this fall in Nvidia’s stock is just a temporary panic or a big change in the AI industry.
DeepSeek R1 has proved that low-cost and more effective AI models can be Created.