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Nvidia reaffirmed the importance of its chips in China on Monday, stating that AI firm DeepSeek’s advancements highlight the growing demand for its technology. The statement came after Nvidia shares tumbled 17% to $118.58, fueled by investor concerns that DeepSeek achieved AI breakthroughs with significantly fewer Nvidia chips than U.S. firms typically require.

Rival Advanced Micro Devices also saw its shares drop by more than 6% to $115.01 amid fears of shifting market dynamics. DeepSeek reportedly utilized around 2,000 of Nvidia’s H800 chips—designed to comply with U.S. export controls—to develop its AI models. Experts had previously warned that U.S. chip restrictions might do little to hinder China’s AI progress.

“DeepSeek’s work illustrates how new models can be created using that technique, leveraging widely available models and compute that is fully export control compliant,” Nvidia said in a statement, emphasizing that demand for its chips will remain strong.

As DeepSeek struggled to handle an influx of new users on Monday, Nvidia pointed to the continued necessity of its GPUs for AI inference. The company is currently selling the H20 chip, which complies with updated export restrictions but remains highly effective for inference.

“How long will Washington allow the best inference chip in the world to be sold to China?” questioned Jimmy Goodrich, a senior adviser at RAND Corp, raising concerns about future regulatory shifts that could further reshape the AI chip market.

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