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AI chip maker Broadcom (AVGO) is tumbling 14% today after a Chinese startup, DeepSeek, reportedly developed a top-notch AI model using old semiconductors. A Look at DeepSeek's AI Product DeepSeek's product appears to be at least as proficient as OpenAI's ChatGPT and Meta's (META) AI offering, even though DeepSeek's offering was built using much older, cheaper chips. Specifically, the Chinese firm reportedly utilized about 50,000 of Nvidia's (NVDA) H100 AI GPUs and spent less than $6 million in order to create its AI model. The H100 was unveiled back in March 2022.
Microsoft (MSFT), Meta (META), and Alphabet (GOOG) are spending hundreds of billions of dollars to develop AI systems, with much of that money being spent on new chips marketed by a number of firms, including Broadcom (AVGO). DeepSeek's ability to develop an AI model so cheaply is leading to fears that the American tech giants will eventually reduce their expenditures on semiconductors, causing the growth of AVGO and its peers to significantly decelerate. Alternatively, some are worried that China will take over the lead in the AI race from America, a development that would likely hurt the financial results of AVGO and its peers. The Recent Price Action of AVGO In the last month, AVGO has given back 10%, but it is still up 23% in the last three months. While we acknowledge the potential of AVGO, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than AVGO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock. READ ALSO 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock Disclosure: None. This article is originally published at Insider Monkey.