Nvidia, a leading name in the tech industry, recently experienced a significant downturn as its stock price plummeted by nearly 17%. This decline was sparked by the emergence of DeepSeek, a Chinese AI startup, whose models are claimed to rival those of industry giants like OpenAI, but at a fraction of the cost. The sudden market shift has challenged previous assumptions that Big Tech would need to invest billions to sustain the latest AI models.
DeepSeek's entry has not only disrupted market expectations but also caused Nvidia's market capitalization to shed almost $600 billion, marking the biggest one-day loss in U.S. history. The situation has prompted CNBC host Jim Cramer to advise investors to refrain from making hasty decisions.
"I have no view on DeepSeek yet, because we just don't know enough. Sometimes, you have to do the hardest thing in the world," remarked Jim Cramer.
Nvidia, which has long dominated the market with its high-priced products, now faces potential sales impacts due to DeepSeek's more cost-effective alternatives. The company's response to these developments has been cautious, as it declined to directly address Cramer's comments, instead referring CNBC to its previous statement. In this statement, Nvidia acknowledged DeepSeek's model as "an excellent AI advancement," while emphasizing that Nvidia chips and networking capabilities remain essential.
Jim Cramer further elaborated on the uncertainty, noting that many stocks, including Constellation Energy, Vistra, Vertiv, and GE Vernova, have shown signs of being "overheated" and have similarly suffered losses. He stressed the importance of patience and avoiding impulsive reactions amidst such market volatility.
"We got to wait, we got to wait until we know more, rather than taking kneejerk action and pretending that we know the answers," cautioned Cramer.
The CNBC Investing Club Charitable Trust, which holds shares of Nvidia, is also closely monitoring the situation. As analysts scramble to understand the implications of DeepSeek's rapid rise, Cramer observed:
"These DeepSeek revelations happened so quickly that many analysts didn't even have time to assess the situation."
Despite Nvidia's efforts to reassure the market about the ongoing need for its technology, Cramer expressed skepticism about whether this would be sufficient to restore Wall Street's confidence in the AI boom.