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The tech sector sell-off triggered by the release of China's DeepSeek R1 large language model could be a golden buying opportunity for investors, according to Wedbush Securities.
Shares of Nvidia (NASDAQ:NVDA) dropped sharply in premarket trading, with Microsoft (NASDAQ:MSFT) also declining. Other AI-related stocks, including Broadcom (NASDAQ:AVGO), AMD (NASDAQ:AMD), Meta Platforms (NASDAQ:META), and Alphabet's Google (NASDAQ:GOOGL), faced significant pressure.
Wedbush analysts acknowledged that DeepSeek R1 presents a major perceived threat to U.S. tech dominance but believe the Magnificent 7 remain focused on artificial general intelligence (AGI) and enterprise AI applications, driving $2 trillion in capital expenditures over the next three years. DeepSeek, an offshoot of a Chinese hedge fund, developed its open-source AI model in two months for $5.57 million.
However, analysts noted that this figure excludes prior research and testing costs. Wedbush also questioned whether DeepSeek bypassed U.S. export controls restricting access to Nvidia's H800 GPUs, saying it "remains to be seen" if the company found a workaround.
This article first appeared on GuruFocus.