Chipmaker Nvidia (NVDA) praised DeepSeek’s R1 model as “an excellent AI advancement,” even though the Chinese startup caused Nvidia’s stock to plummet 17% on Monday. An Nvidia spokesperson noted that DeepSeek’s work illustrates the potential of “Test Time Scaling,” which is a technique that enables new models to be created using widely available models and compute resources. Nvidia’s statement suggests that it sees DeepSeek’s breakthrough as a potential opportunity. Indeed, the spokesperson noted that “inference requires significant numbers of NVIDIA GPUs and high-performance networking.”
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Inference refers to the process of using a trained model to make predictions or classify new and unseen data. This implies that DeepSeek’s use of Nvidia GPUs, which are fully export-compliant, could lead to increased demand for Nvidia’s products. Nevertheless, DeepSeek’s R1 model has caused many to question if it was a good idea for major tech companies to make multi-billion dollar investments in Nvidia-based AI infrastructure.
In fact, analysts are wondering if similar results can be achieved more cheaply, which could have significant implications for the AI industry. However, this is unlikely to have rattled Nvidia CEO Jensen Huang, who has been discussing the concept of “test-time scaling” with other industry leaders and mentioned it earlier this month at the Consumer Electronic Show.
Is NVDA a Good Stock to Buy?
Turning to Wall Street, analysts remain bullish on NVDA stock, with a Strong Buy consensus rating based on 36 Buys and three Holds assigned in the past three months. After a 90% rally in its share price over the past year, the average NVDA price target of $177.56 per share implies an upside potential of 49.8% from current levels.
