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Nvidia (NVDA) is falling 4% after Alibaba (BABA) reported today that its new AI model performs better than DeepSeek's offering. The latter Chinese start-up's model, which reportedly performed better than OpenAI's product in a number of areas, cost only about $5.6 million to train, according to DeepSeek.
BABA's news may be renewing fears, first ignited by DeepSeek, that Chinese companies have discovered ways to launch highly advanced AI models without using NVDA's recently made, very expensive chips.
More Information About BABA's AI Model
Called Qwen 2.5-Max, BABA's model "demonstrated significant advantages across most benchmarks" relative to Meta's (META) Llama-3.1-405B, BABA reported. Llama-3.1-405B was launched last July. BABA added that "Qwen2.5-Max outperforms DeepSeek V3 in (a number of) benchmarks."
Since the U.S. government has heavily restricted China's access to America's most advanced AI chips, the Street may fear that BABA created Qwen 2.5-Max using relatively old, cheap GPUs from Nvidia. As a result, Alibaba's announcement could be renewing worries about NVDA's outlook that were first sparked by DeepSeek earlier this week.
The Price Action of NVDA
In the last month, the shares have sunk 8%, while they are down 11.5% in the last three months.
While we acknowledge the potential of NVDA, 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 NVDA 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.