Nvidia (NASDAQ:NVDA) stock has been on a rough ride over the past week, plunging 16% after China’s DeepSeek unveiled its R1 AI model. This open-source language model reportedly performs tasks similar to advanced models like OpenAI’s but was developed at a fraction of the cost.
Maximize Your Portfolio with Data Driven Insights:
- Leverage the power of TipRanks' Smart Score, a data-driven tool to help you uncover top performing stocks and make informed investment decisions.
- Monitor your stock picks and compare them to top Wall Street Analysts' recommendations with Your Smart Portfolio
At first glance, this could spell trouble for Nvidia. The AI chip leader relies heavily on selling high-performance GPUs to cloud providers that support AI startups. However, as these startups struggle to stay afloat – OpenAI reportedly lost $5 billion in 2024 – the demand for Nvidia’s expensive chips might not remain as strong as before.
Even so, one investor, known by the pseudonym Cash Flow Venue, believes this sell-off presents an opportunity. He outlines three key reasons why buying the dip could be a savvy move.
First, CFV pushes back on the claim that DeepSeek trained its AI model for just ~$6 million, calling it “strongly misleading.” The investor argues that training is an ongoing process involving repeated experiments and significant costs beyond initial GPU usage. DeepSeek benefits from its parent company, High-Flyer Quant, which made substantial investments in Nvidia GPUs before U.S. export restrictions. Reports suggest DeepSeek has access to ~50,000 Nvidia Hopper GPUs, with CAPEX for AI hardware exceeding $1.6 billion. CFV emphasizes that additional expenses – such as R&D, data collection, and operational costs – make the actual investment far greater than the reported $6 million.
Furthermore, CFV believes that Nvidia’s main clients, including Microsoft and Meta, remain supply-constrained and are significantly increasing CAPEX to expand AI capabilities. Microsoft has doubled its data center capacity over the past three years but still needs more infrastructure to support Azure and AI growth. Meanwhile, Meta raised its 2025 CAPEX forecast to $60-$65B to fund AI and core business investments.
“I believe NVIDIA is set to continue to benefit from such a high demand and investors have little to worry about in the near-term regarding the business pipeline and fundamentals. It’s worth remembering that both Hopper and Blackwell systems are associated with certain supply constraints and are likely to exceed the demand in upcoming quarters,” CFV opined.
Beyond near-term demand, the broader AI market remains a powerful tailwind for Nvidia. According to the investor, AI adoption is projected to grow at a 29.1% CAGR, reaching over $530.6 billion by 2030. As AI spreads across industries, demand for high-performance computing is expected to remain strong, even with the rise of cost-efficient models. Geopolitical tensions surrounding AI infrastructure and data protection further cement Nvidia’s position as the dominant supplier in the space.
Summing up his bullish stance, CFV stated: “Add the opportunistic (by the last couple of years standards) valuation and a solid product roadmap for the upcoming years to the equation and I arrived at a ‘strong buy’ rating for NVIDIA. I am still bullish, despite recent market turmoil.”
That’s just one bullish take, and plenty more are floating around Wall Street. NVDA stock has a Strong Buy consensus, backed by 37 Buys and just 3 Holds. With an average price target of $178.63, analysts are eyeing a potential 48% surge in the next year. (See NVDA stock forecast)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
