Finance professor Aswath Damodaran has issued a forecast suggesting a potential 37% drop in Nvidia’s stock price, raising questions about the company’s future amid changing market dynamics.
Aswath Damodaran, known for his expertise in valuation, recently projected that Nvidia’s stock could decrease by 37%. His analysis cites the emergence of DeepSeek, a Chinese AI start-up, as a potential disruptor in the AI and chip industry. Damodaran suggests that DeepSeek’s innovation could create a divided AI market, with low-grade and premium segments, potentially undermining Nvidia’s dominant position.
DeepSeek claims to have developed cost-effective AI applications, which challenges the expensive models by firms like OpenAI. If DeepSeek’s claims hold true, this could indeed pressure Nvidia’s market hold, as per Damodaran’s theory. However, questions arise regarding the extent of DeepSeek’s actual funding, initially reported as $6 million. If this amount is significantly higher, Nvidia may face less immediate threat.
Currently, Nvidia maintains strong relationships with major tech companies such as Microsoft, Alphabet, and Amazon. These companies are investing in internal chipware, seeking cost-saving diversifications. Despite potential market commoditization, Nvidia’s chips remain integral to these enterprises’ strategies. Thus, DeepSeek may reinforce rather than alter the perception of chips as commodity products.
While Nvidia’s growth path appears less clear, the company continues to be a primary supplier for large tech firms investing in AI infrastructure. Recent statements from key industry leaders like Meta’s Mark Zuckerberg and Microsoft executives affirm ongoing investment in AI, implying continued demand for Nvidia’s products.
Despite Nvidia’s robust customer commitments, its share price has seen volatility, possibly due to market apprehensions ahead of its earnings report. Analysts anticipate Nvidia’s upcoming disclosures to clarify AI expenditure trends. The expectation is that Nvidia will emphasize sustained demand for its advanced chips, hinting at potential stock recovery.
In light of current circumstances, investors might view fluctuations in Nvidia’s stock as buying opportunities, expecting long-term value appreciation anchored on continued demand for its leading-edge technology.
