Analysts offer blunt take on DeepSeek AI panic

Samuel O'Brient

Tue, Jan 28, 2025, 5:03 PM 4 min read

Is the DeekSeek hype overblown? Experts say yes

When a news update sends Wall Street into a selloff, it's easy for investors to panic. That’s exactly what happened yesterday when the DeepSeek news pushed Nvidia down after the startup announced it had built the R1 with older, out-of-date AI chips for only $5.6 million.

That's certainly not good news for a company that relies on customers buying its highly priced graphics processing units (GPUs).

But Wall Street veteran and portfolio manager Chris Versace recently highlighted that his team has tried to avoid a ‘shoot first, ask questions later’ mindset when evaluating DeepSeek's impact on tech sector leaders.

“I have to say it's a one-year-old startup, and it's going head-to-head with some of the best and brightest minds out there,” he noted, expressing some skepticism that the new company will continue to push NVDA stock down.

Other experts have issued similar takes on the DeepSeek panic being an overreaction. Gene Munster, a Managing Partner at Deepwater Asset Management, recently laid out why he sees the DeepSeek news as potentially positive for AI infrastructure:

The fact that both NVDA and MSFT stock are rising again today further supports the case that DeepSeek panic is overblown. However, it should be noted that while chip stocks dipped yesterday, several prominent software stocks with AI exposure rose, including Salesforce (CRM) and Snowflake (SNOW) .

Versace attributes this to the idea that the rise of DeepSeek’s AI model could lead to “quicker adoption of AI and lower costs to do so, especially if other AI models emerge,” similar to the case made by Munster.

His portfolio team has taken the DeepSeek chaos as an opportunity to load up not just on Nvidia shares but to stock up on fellow chipmaker Marvell Technology (MRVL) and power management company Eaton Corp (ETN) .

This follows some advice from Wedbush Securities tech sector analyst Dan Ives, who recently highlighted Nvidia’s dip as a “golden” buying opportunity, stating that no U.S. Global 2000 company would use a Chinese AI company like DeepSeek to launch its AI infrastructure.

There could be an AI investing opportunity in this crisis

Despite yesterday’s market chaos, most tech stocks are rising again, even as DeepSeek continues to trend. That may be because other Wall Street analysts are laying out ways for investors to profit from this new AI development.

In a new report, BofA Securities research analysts Brad Sills and Carly Liu argue that the DeepSeek breakthrough could continue to be a bullish indicator for software stocks, given the economic implications of the DeepSeek R1 model. Per their note:

“The exact cost of development and energy consumption of DeepSeek are not fully documented, though, as outlined in our note, we believe that the implications of lower cost to run AI models is a benefit to the general software group.”

Microsoft CEO Satya Nadella sees the DeekSeek breakthrough as an overall win for the broader tech sector. To illustrate this, he used the analogy of Jevons Paradox, which argues that when the consumption of a resource increases in efficiency, it ultimately leads to higher consumption.

This sentiment is echoed by Mark Malek, CIO of Siebert, who also views yesterday’s selloff as an overaction on the part of Wall Street.

“DeepSeek developed an AI in a short period of time with allegedly fewer resources than those used by the US-based prototypes we have all been using to date. That is great news… for every AI behemoth out there who is probably already experimenting with similar models and will by now already be testing DeepSeek’s method.”

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Is the DeekSeek hype overblown? Experts say yes

There could be an AI investing opportunity in this crisis

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