Nvidia experienced a significant market setback on Monday, with its shares plummeting by nearly 17%. This decline, the steepest for the company since 2020, has been attributed to growing concerns over the future of artificial intelligence (AI) investments, particularly in light of competitive pressures from Chinese startups like DeepSeek. The broader tech sector was not spared, witnessing a sell-off exceeding 5%, with companies like Broadcom also feeling the heat.
Tom Lee, head of research at Fundstrat Global Advisors, believes the market reaction was an overreaction. He maintains that Nvidia's current troubles do not signal a long-term decline, expressing confidence that the company's prospects remain strong. Lee remarked he would be "personally surprised" if Nvidia followed the path of obsolescence akin to Betamax. Despite the turmoil, he views Nvidia's share drop as a buying opportunity for savvy investors, drawing parallels to past market dips.
"Nvidia's decline is the worst since March 2020, and we know that ended up being a huge opportunity for investors. It's not a fun day, but I'd be looking at this as an opportunity." – Tom Lee
Adding to the intrigue is Nvidia's recent launch of a free, open-source large language model in December, built for under $6 million. This innovation underscores Nvidia's continued commitment to advancing AI technologies amidst intensifying competition. The company remains a vital player in the AI race between China and the US, where Beijing appears to be advancing rapidly.
The market's attention is also drawn to the financial sector, which Lee identifies as having a robust fundamental case for change this year. He attributes this potential to the new administration and a dovish Federal Reserve that could lead to increased capital market activities and maintain favorable conditions for banks.
"I think financials to me represent a pretty good fundamental case of change this year because we have a new administration, a Fed that is dovish, yields that aren't painful for banks — and a time" – Tom Lee