Nvidia shares tumbled nearly 6% in intraday trading on Wednesday, continuing a turbulent week characterized by concerns over the competitiveness of American AI firms and their spending on the emerging technology. This decline followed a significant drop of over 17% on Monday, which resulted in a loss of nearly $600 billion off Nvidia’s market cap.
Nvidia shares wobble wednesday as AI chipmaker endures a turbulent trading week
The decline was fueled by the rapid rise of lower-cost AI models from Chinese companies, such as DeepSeek, which claims its AI model can operate on par with American counterparts at a much lower cost. This new competition prompted analysts at Bank of America to describe the situation as “AI’s Sputnik moment,” indicating that it could compel U.S. firms to increase their spending on AI technologies, potentially benefiting Nvidia, Broadcom, and other AI chipmakers.
During the sell-off, Nvidia led losses in the Dow Jones Industrial Average and was among the top decliners on the S&P 500 and Nasdaq. Other AI-focused stocks, including Broadcom and Palantir, also experienced declines. The market faced additional pressure as Chinese tech giant Alibaba introduced a new AI model that it claims outperforms offerings from DeepSeek, OpenAI, and Meta Platforms.
Facing this competitive landscape, the earnings reports of Meta and Microsoft are anticipated, as investors are keen to see how these companies justify their AI investments. Analysts from Morgan Stanley noted that advancements by DeepSeek could positively influence Microsoft and Meta, hinting that Meta might adopt these developments and that Microsoft’s Azure platform might benefit from increased proliferation of AI models.
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Bank of America reiterated a “buy” rating and a $190 price target for Nvidia, suggesting that the recent sell-off represents an enhanced buying opportunity. Despite the bleak market conditions, retail investors demonstrated optimism in Nvidia; data from VandaTrack indicated that over $562 million was invested in the stock on Monday, marking the largest single-day inflow in its records. On Tuesday, as Nvidia’s shares rebounded approximately 9%, retail investors contributed nearly $360 million more.
In total, retail investors injected over $920 million into Nvidia shares across the tumultuous two days. Strategists on Wall Street largely agreed with this bullish sentiment. Fundstrat’s head of Research, Tom Lee, referred to the situation as a “buy the dip” moment for Nvidia, while Bank of America Analyst Vivek Arya supported this view, stating the recent downturn presented a sound buying opportunity for Nvidia and similar companies.
DeepSeek’s claim that its AI model uses cheaper chips and less data has raised concerns regarding future AI chip sales for industry leaders like Nvidia and questioned the long-term dominance of U.S. hyperscalers. Bernstein analyst Stacy Rasgon characterized the sector’s sell-off driven by DeepSeek’s emergence as “overblown,” stating it does not indicate “doomsday for AI infrastructure.”
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Featured image credit: Nvidia
