Nvidia confident in chip demand despite 17% shares drop amid DeepSeek’s struggles with user surge

USA: Nvidia remains confident that demand for its chips will continue to grow, even after a 17% drop in shares. This drop followed concerns that Chinese artificial intelligence (AI) startup DeepSeek used fewer Nvidia chips than US competitors.

On Monday, the company said that DeepSeek’s advances show how vital its chips are for the Chinese market and that more will be needed to keep up with growing demand, as reported by Reuters.

In a statement, Nvidia pointed out that DeepSeek’s success in AI research shows how new models can be built using widely available models and fully export control-compliant computing.

DeepSeek has recently gained attention for its open-source AI chatbot R1. One of the startup’s research papers showed it used around 2,000 Nvidia H800 chips, designed to meet US export controls from 2022, but experts told Reuters these controls would barely slow China’s AI progress.

US microchip export controls were meant to halt China’s ability to develop supercomputers that could be used for nuclear weapons and AI systems.

Jimmy Goodrich, a senior adviser for technology analysis at RAND Corp, said China has at least a dozen supercomputers with many Nvidia chips that were legal to buy when DeepSeek used them to improve efficiency. US AI firms have also focused on computing efficiency.

According to Mr Goodrich, “DeepSeek didn’t come out of nowhere — they’ve been at model building for years,” adding that DeepSeek has always had a strong team, and with more computing, their capabilities would be limitless.

On Monday, DeepSeek struggled to handle a surge of new users. Nvidia said the process of serving new users, called “inference,” shows its chips will remain in demand.

Nvidia said in its statement that inference needs many Nvidia GPUs and high-performance networking.

Nvidia sells the H20 chip designed to meet the latest export controls. While these restrictions limit its use for AI training, Mr Goodrich said it’s “probably the best chip in the world for inference.”

He added, “How long will Washington allow the best inference chip in the world to be sold to China?” /TISG

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