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The tech industry has had an insatiable appetite for Nvidia’s chips over the last two years. But the feast may be over sooner than many had expected.
Jan. 27, 2025, 3:22 p.m. ET
Nvidia, which soared to the top of the stock market by selling the computer chips fueling the world’s artificial intelligence boom, has been dealt a tough reality check by a small Chinese company that showed it could do more with less of what Nvidia makes.
On Monday, shares of Nvidia plunged more than 16 percent after the company, called DeepSeek, showed that it could train a cutting-edge A.I. system with a fraction of the Nvidia chips that had been used in the past by OpenAI, the maker of ChatGPT.
DeepSeek’s release challenged a tech industry consensus that in order to build bigger and better A.I. systems, companies would have to spend billions and billions of dollars on new data centers. At the center of those data centers would be the one thing that, perhaps until now, no A.I project could do without: a huge cache of Nvidia’s chips.
The Silicon Valley company, by some estimates, controls 90 percent of the market for specialized chips used to build A.I. systems. It has had a remarkable run since OpenAI released ChatGPT in late 2022. Over the past two calendar years, Nvidia’s revenue has jumped more than 200 percent to $126 billion, while the total value of the company has rocketed 700 percent as of Friday’ market close, peaking at $3.62 trillion in November.
But DeepSeek’s apparent breakthrough has shown that the appetite for Nvidia’s chips may not be as limitless as some had imagined just a week ago. While Nvidia is still in an enviable position — there is little competition for its A.I. chips — the companies that have been buying its technology could slow down their spending.
“Before, A.I. was bigger, better, faster. Bigger chips equal bigger A.I. capabilities,” said Patrick Moorhead, chief executive of Moor Insights & Strategy, a tech and semiconductor research firm. “But this was so quick it raises questions about how long that is true for Nvidia and whether people will need as many of its chips in the future.”
