On a recent segment of “Mad Money,” host Jim Cramer tackled the fallout from a tumultuous week for Nvidia (NVDA), primarily driven by the emergence of DeepSeek AI. Nvidia, long considered the titan of artificial intelligence (AI) with its premium-priced chips, faced a significant challenge as DeepSeek claimed to achieve high AI performance using Nvidia’s less expensive, lower-end chips, potentially disrupting Nvidia’s market dominance.
Cramer highlighted the shift in dynamics where DeepSeek’s approach could mean companies no longer need to invest in tens of thousands of Nvidia’s high-cost chips for AI model training. DeepSeek, emerging from a Chinese hedge fund, boasted of developing an AI model with just $6 million, a fraction of the investment typically required, suggesting a new era of cost-effective AI solutions. This revelation led to a sharp decline in Nvidia’s stock, with investors questioning the sustainability of Nvidia’s pricing model if such claims held true.
However, Cramer introduced a note of skepticism, pointing out that the narrative around DeepSeek might not be as straightforward as reported. He referenced an article from SemiAnalysis, which suggested that DeepSeek’s actual hardware expenditure might be significantly higher than the publicized $6 million, possibly up to $1.6 billion, casting doubt on the cost-efficiency narrative. This discrepancy could mean that the market’s reaction to Nvidia’s stock – down nearly 11% year-to-date – might have been based on incomplete or misleading information.
Cramer also questioned the actions of tech giants like Meta (META), Tesla (TSLA), and Oracle (ORCL), all of whom have continued to purchase Nvidia’s chips at premium prices. This behavior indicates that these companies, led by tech visionaries, might not see DeepSeek as the game-changer it’s portrayed to be, or perhaps they have no alternative due to high demand for Nvidia’s technology.
The “Mad Money” host pondered whether DeepSeek was genuinely a threat to Nvidia’s pricing strategy or if it was just another attempt to challenge the AI chip leader’s market position. He suggested that while the deep-seated concerns about Nvidia’s stock might be logical based on the DeepSeek narrative, the reality could be far different, hinting that the market might have overreacted.
Cramer concluded by questioning the long-term implications of DeepSeek’s claims, suggesting that while anything is possible in tech, the most damaging scenario for Nvidia might be overstated. He implied that the market’s response could be more about short-term speculation than a genuine shift in Nvidia’s operational landscape, leaving investors to ponder if being the “king” of AI hardware is as advantageous as it once seemed.
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