DeepSeek innovation impacts Nvidia and Alphabet, sparking debate on which AI stock to buy

From Nasdaq: 2025-02-03 13:06:00

A small Chinese AI company called DeepSeek caused a major sell-off in U.S. tech stocks, particularly impacting Nvidia. DeepSeek claims to have developed a powerful language model at a fraction of the cost using older Nvidia chips, raising questions about the future of AI sector. Investors debate whether to buy the dip on Nvidia or Alphabet.

While Nvidia faces uncertainty, some analysts see DeepSeek’s innovation as a positive step towards artificial general intelligence. BMO analysts suggest DeepSeek used servers with significantly less power intensity than Nvidia’s latest GPUs. Concerns about DeepSeek’s impact on Nvidia’s market dominance remain, but no sell ratings have been issued yet.

Alphabet also faces a threat from DeepSeek, although its stock didn’t suffer as much as Nvidia’s due to different circumstances. Alphabet is dealing with a Department of Justice lawsuit and potential breakup, but its AI strengths may not be fully priced into the stock. Analysts recommend buying Alphabet over Nvidia for long-term growth potential.

Despite the recent sell-off, Nvidia’s stock may offer value at its current price, trading at about 41 times forward earnings. On the other hand, Alphabet’s stock price may not reflect its AI businesses’ worth, potentially undervaluing the company. Analysts suggest considering Alphabet over Nvidia for investment, citing better valuation and growth prospects.

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Read more at Nasdaq: Nvidia vs. Alphabet: Which Artificial Intelligence (AI) Stock Should You Buy After the Emergence of China’s DeepSeek?