DeepSeek's breakthrough in AI chips impacts AMD and Nvidia stocks, with AMD appearing as the safer bet.

From Nasdaq: 2025-02-02 04:15:00

A Chinese start-up, DeepSeek, developed an open-source large language model for AI chips at a cost of less than $6 million. This news caused stocks like AMD and Nvidia to plunge, raising questions about the semiconductor market’s future. Investors wonder whether AMD or Nvidia is the better investment given the industry’s potential flux.

AMD, despite lagging behind Nvidia in AI accelerators, saw a 107% annual growth in data center revenue. Data center sales made up 48% of AMD’s revenue, up from 25% last year. While AMD’s stock has struggled with profitability, its lower valuation and growth prospects make it an attractive option for investors.

Nvidia remains the dominant player in the AI accelerator market, with revenue rising 135% yearly. However, DeepSeek’s breakthrough could impact Nvidia’s sales, potentially leading to price reductions and revenue slowdowns. Nvidia’s high price-to-book ratio and uncertainty in the semiconductor market make investors cautious.

Despite Nvidia’s market dominance, AMD appears to be the safer bet due to DeepSeek’s breakthrough with Nvidia processors. Demand for AMD accelerators may increase, and the company’s lower valuation and growth prospects make it a more appealing investment opportunity. In the current market conditions, AMD stands out as the better choice over Nvidia.

Considerations for investing in AMD should include the potential impact of DeepSeek’s breakthrough on the semiconductor market. The Motley Fool Stock Advisor team has identified the 10 best stocks to buy now, and while AMD wasn’t on the list, its lower valuation and growth prospects make it an attractive investment option. Investors should weigh the risks and rewards before deciding on AMD or other investment opportunities.



Read more at Nasdaq: Better Artificial Intelligence Stock: AMD vs. Nvidia