Tech-heavy Nasdaq futures slumped on Monday, with artificial intelligence-darling Nvidia (NASDAQ:NVDA) in particular edging lower in premarket US trading, amid concerns that a new model from Chinese start-up DeepSeek could necessitate less investment in AI infrastructure.
"For investors holding NVDA or related stocks, the critical question is whether capex growth in 2026 can maintain its trajectory, especially in a market priced for perfection," US Tiger Research analysts wrote in a client note.
"Until there’s clarity, NVDA’s increased uncertainty will pressure its stock price. However, without deeper insights, shorting NVDA may also be premature. Observing from the sidelines is prudent."
Broader Wall Street futures also fell sharply, after DeepSeek launched a set of new open-source models over the past week claiming to match offerings from rivals such as ChatGPT-maker OpenAI for a fraction of the cost.
The release and subsequent testing of the company’s flagship model -- DeepSeek R1 -- sparked questions over a surge in recent capital expenditures on building out AI infrastructure. Spending has stretched into the hundreds of billions of dollars among U.S. majors.
Bernstein analysts noted that the new models were impressive, especially in their ability to compete with leading similar products from OpenAI and Meta Platforms (NASDAQ:META). However, they said the broader market reaction to DeepSeek's models appears to be overblown.
“If we acknowledge that DeepSeek may have reduced costs of achieving equivalent model performance by, say, 10 [times], we also note that current model cost trajectories are increasing by about that much every year anyway [...] which can’t continue forever,” Bernstein analysts wrote in a note.
They added that the AI industry needed innovations like DeepSeek to keep progressing, because it could help squeeze more performance out of existing hardware.
The brokerage noted that the need for increased AI infrastructure remains, saying that any new computing capacity was likely to get absorbed by a jump in AI demand.
Bernstein argued that investors should not buy into the “doomsday scenarios currently playing out in the Twitterverse", with the brokerage still granting chipmakers like Nvidia (NASDAQ:NVDA) and peer Broadcom (NASDAQ:AVGO) "outperform" ratings based on their AI prospects.
