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Artificial intelligence stocks got a major shake-up when Nvidia (NVDA), the leader in AI chips, notched their largest single-day plunge since 2020. On Jan. 27, Nvidia shares dropped by 17%, wiping out an astonishing $589 billion from Nvidia’s market capitalization.
This sharp decline came after Chinese AI startup DeepSeek announced its R1 model, which reportedly matches the performance of top U.S. AI models while using far fewer chips. DeepSeek claimed it developed the model for just $5.6 million — a fraction of the hundreds of billions U.S. tech giants typically spend on AI infrastructure.
The market’s reaction to DeepSeek raised questions about future demand for Nvidia’s chips, even though it also highlighted their effectiveness. Still, analysts like those at JPMorgan believe these concerns are overblown. Nvidia itself has stressed that advanced AI models still require massive amounts of computational power, and DeepSeek’s success doesn’t change that.
As Nvidia continues to highlight the growing need for powerful AI chips to support cutting-edge models like DeepSeek, it’s clear the demand isn’t going anywhere anytime soon.
Let’s dive into how this trend is shaping Nvidia’s growth and what it means for NVDA stock moving forward.
Nvidia’s Surge in the AI Era
Nvidia (NVDA) has made a name for itself as a leader in tech, designing GPUs that power everything from video games to AI-driven data centers. Its business combines hardware and software to create solutions for gamers, businesses, and developers, cementing its role as a key player in AI infrastructure. Nvidia’s financial results are remarkable. In the third quarter of its fiscal 2025, it generated $35.1 billion in revenue, a 94% increase year-over-year.
Over the past year, Nvidia’s stock has climbed an impressive 94%, reaching a high of $153.13 earlier this month. The stock is down 9.4% in the year to date, reflecting the volatility in the AI sector following DeepSeek’s advancements.
While DeepSeek’s announcement of creating an AI model for just $5.6 million initially raised concerns about Nvidia’s growth prospects, the company sees it differently.
Nvidia argues that DeepSeek’s success actually reinforces the need for more AI chips. “Inference requires significant numbers of Nvidia GPUs and high-performance networking,” the company stated, emphasizing that DeepSeek’s work demonstrates how new models can be created using widely available computing resources.
After the selloff sparked by DeepSeek’s news, Nvidia’s stock quickly rebounded, adding $260 billion back to its market cap. This resilience underscores how much faith investors have in Nvidia’s long-term potential.
Interestingly, DeepSeek’s efficiency breakthrough could actually boost Nvidia’s growth rather than hinder it. Analysts point to the Jevons Paradox — the idea that greater efficiency can lead to increased demand — as a sign that democratizing AI development might expand the need for Nvidia’s chips across more industries and users than ever before.
The Fundamentals Driving Nvidia’s Growth
Nvidia’s success comes down to its knack for innovation and ability to meet market demands, and its latest announcements show exactly that. The launch of the NVIDIA AI Blueprint for retail shopping assistants is a game-changer for how people shop. It lets developers create AI assistants that can give personalized recommendations, handle complex searches, and even show virtual previews of products.
This makes shopping easier and more satisfying for customers, putting Nvidia at the center of a retail market expected to hit $35 trillion by 2028. For Nvidia, this means more demand for its GPUs and software, which could drive up revenues.
On top of that, Nvidia introduced NVIDIA Cosmos, a platform designed to make developing physical AI systems like robots and self-driving cars faster and cheaper. By creating synthetic data for training these systems, Cosmos saves time and money. Big names like Uber (UBER) and Xpeng (XPEV) are already using it, solidifying Nvidia’s lead in robotics and autonomous vehicles.
Analyst Ratings and What Lies Ahead
Nvidia’s future looks just as bold as its recent accomplishments. The company expects fourth-quarter revenue to hit $37.5 billion, give or take 2%, continuing its growth thanks to the rising demand for AI chips. Gross margins are expected to stay solid at around 73%, showing Nvidia’s ability to stay profitable even in a competitive market.
Analysts are clearly optimistic about Nvidia’s position in the AI space. Out of 43 analysts, 37 rate the stock a “Strong Buy,” two suggest a “Moderate Buy,” and only four recommend holding. The average price target is $176.90, which represents 43% upside from the current price of $123.70.
Retail investors seem equally confident, pouring in record-breaking net purchases of $562 million during the DeepSeek selloff — the largest single-day inflow in over a decade. This enthusiasm carried into the next day, with $921 million worth of shares bought over two days. Institutional investors also show strong faith in Nvidia’s future, holding 65.27% of its shares.
Conclusion
Nvidia’s role in shaping the AI revolution is undeniable, and DeepSeek’s success only amplifies the demand for its cutting-edge chips. With strong financials, groundbreaking innovations, and unwavering confidence from analysts, the company is well-positioned to ride the AI wave for years to come. For investors, Nvidia’s story isn’t just about today’s gains — it’s about the massive potential that lies ahead in a world increasingly powered by AI.
