NVIDIA Corporation NVDA has once again proven its resilience, rebounding 8.9% on Tuesday after a brutal 17% plunge on Monday. The sell-off was triggered by concerns that Chinese AI startup DeepSeek’s latest artificial intelligence (AI) model could reduce demand for NVIDIA’s high-powered graphics processing units (GPUs).
DeepSeek’s R1 model sent shockwaves through the tech sector on Monday by demonstrating capabilities that rival OpenAI’s ChatGPT—at a fraction of the cost. The AI model was reportedly trained with less advanced hardware, raising fears that demand for NVIDIA’s cutting-edge GPUs might weaken. This narrative led to widespread selling, wiping out $589 billion in NVIDIA’s market value in a single day.
What Drove NVDA Stock’s Rebound?
After the initial shakeout, investors realized that the panic was overblown. NVIDIA remains the undisputed leader in AI hardware, and the recent dip may have been a golden buying opportunity. Also, Wall Street analysts quickly came to NVIDIA’s defense following the panic-driven sell-off. Several analysts noted that DeepSeek still relies on thousands of NVIDIA GPUs, and its success could increase long-term AI demand rather than reduce it.
Microsoft CEO Satya Nadella opines that the DeepSeek breakthrough could lead to a Jevons Paradox phenomenon. A key economic principle, Jevons Paradox, suggests that increased efficiency often leads to greater consumption. If DeepSeek and others make AI models more efficient, AI adoption could accelerate, driving more demand for NVIDIA’s GPUs. Instead of a headwind, DeepSeek’s innovation could be a catalyst for even faster AI expansion.
Apart from NVIDIA, shares of AI chip and component providers Marvell Technology, Inc. MRVL, Broadcom Inc. AVGO and Amphenol Corporation APH fell 19.1%, 17.4% and 12.6%, respectively, on Monday. However, just like NVIDIA, all three stocks witnessed a slight recovery during Tuesday’s trading session as the DeepSeek-related panic settled.
NVIDIA’s Fundamentals Remain Strong
Despite the recent turmoil, NVIDIA shares are still up 103.3% over the past year, significantly outperforming the Zacks Semiconductor – General industry’s gain of 66.4%. At the heart of NVIDIA’s meteoric rise is its dominance in AI, particularly in powering generative AI applications. From ChatGPT to advanced automation, NVIDIA’s GPUs are the gold standard for businesses leveraging AI.
One-Year Price Return Performance
Image Source: Zacks Investment Research
NVIDIA’s reach isn’t confined to AI. The company’s GPUs are integral to advancements in sectors like automotive, healthcare and manufacturing. In automotive, NVIDIA’s solutions contribute to the development of autonomous vehicles, a market expected to experience rapid growth over the next decade. In healthcare, NVIDIA’s GPUs are revolutionizing medical diagnostics, enhancing imaging processes and improving patient care. This broad, multi-industry applicability positions NVIDIA as a resilient and diverse growth engine in the tech landscape.
Moreover, NVIDIA’s robust data center solutions are gaining traction. As companies invest in cloud and edge computing, demand for powerful data center infrastructure rises, making NVIDIA’s data center business a critical growth driver. This sector alone is projected to significantly boost the company’s revenues as businesses accelerate their digital transformation efforts, solidifying NVIDIA’s long-term growth potential.
NVIDIA’s financial performance validates its market dominance. In the third quarter of fiscal 2025, revenues soared 94% year over year, while non-GAAP EPS skyrocketed 103%. For the fourth quarter, the company expects revenues to be $37.5 billion, implying a massive leap from $22.1 billion in the year-ago period.
The Zacks Consensus Estimate for NVIDIA’s fiscal 2025 and 2026 revenues indicates growth of 111.8% and 48.7%, respectively. The consensus mark for earnings implies a year-over-year increase of 126.2% in fiscal 2025 and 43.2% in fiscal 2026. These forecasts reflect confidence in the company’s sustained growth and market leadership across multiple sectors, including gaming, automotive and professional visualization.
Final Thought: Buy NVDA Stock Now
The DeepSeek panic was an overreaction, and NVIDIA’s swift rebound signals investor confidence. AI isn’t slowing down — it’s accelerating. As the leading supplier of AI chips, NVIDIA stands to benefit enormously from this growth. For investors seeking exposure to the AI revolution, NVIDIA’s recent dip was a gift. Now is the time to buy and hold this AI powerhouse for the long run.
Currently, NVIDIA carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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