I get the stupid basic excuse about big tech purchasing loads of silicon. That reasoning seems deeply flawed and idiotic to me. If Deepseek R1 democratizes training more for less, then that means customers with mid to small size data centers like universities now have access to train and research models in this space. Nvidia does not have a real competitor, so they get the sale. Their potential customer base just grew exponentially right? OpenAI should be devalued massively by this change, but I don’t see why anything impacts Nvidia negatively in this instance. Am I missing something or is the market this level of stupid? (I have no skin in this game)
The stock market is crazy and it doesn’t always act rational. Now that I said this, I think the reason is more a question of Chinese vs US technical superiority. In theory, China has no access to the high technology AI chips from NVIDIA, due to sanctions. This must mean that Deepseek was developed with cheaper chips, and NVIDIA chips are not necessary for training LLMs.
Sanctions are failing in a huge way to stop chips like the m800 from making it into China. Not only that but the M100 that we are selling to China is essentially a detuned M800. It’s hard for investors to keep burning mountains of cash on US AI companies that charge an arm and a leg for their services when a Chinese model comes out totally free and doing just as well as the premium offerings. If investors aren’t willing to burn cash, the cash burning dumpster called Nvidia takes a hit. That’s why the stock is dropping.
That is what my intuition was looking for but not finding. I wasn’t thinking about the ban and implications. This makes much more sense.