Aswath Damodaran is an accrued professor at the Stern School of Business of New York University. In particular, Damodaran specializes in appreciation – various books on the subject and models and predictions are often published to the public. Over the years, Damodaran has become known as the “dean of the appreciation” among financial journalists and media personality.
Last week Damodaran published a new prediction Nvidia(Nasdaq: NVDA) – asked for a decrease in the share price of 37% compared to the current levels (from 5 February).
Below I will describe the logic of Damodaran to help explain why he calls such a drop. From there I will give my opinion why I am not fully in line with his bearish prediction.
In the meantime you are probably familiar with the latest talk point of AI, called a Chinese start-up Deep. Deepseek is the newest company that pops up in the AI rich and claims that the game-changing applications has developed for a fraction of the costs used to build regular models from OpenAI or Anthropic.
In the analysis of Damodaran, he states that Deepseek “has changed the AI story” that “will create a split AI market, with a segment of low-quality AI products that has been constructed and very competitive and a segment of premium products”.
On the surface I understand what Damodaran starts. If (keyword “if”) Deepseek has built a platform on the same foot or superior to existing AI models and would do this with less expensive infrastructure, the position of Nvidia would seem to be in danger if the King of the Chip -Rijk.
For me, the above statement is even more a theory than anything. It seems that every hour publishing more stories about Deepseek-where many now claim that the start-up was financed with much more than the initial $ 6 million that it claimed. If that is the case, Nvidia must be less concerned.
But in a world where Deepseek was built for much less than financing compared to what was plowed in OpenAI and his cohorts, I still don’t see such an idea as a bad thing for Nvidia. The reason actually comes together with Damodaran’s point of chipware that is being produced.
At the moment it is known that many of the largest customers of Nvidia are Cloud -Hyperscalers such as Microsoft” AlphabetAnd Amazon. In addition, large tech giants such as such as Meta platforms And Tesla are also some of the largest adopters of Nvidia. What is Also It is known that many of these companies invest heavily in internal chipware and work with cheaper providers, such as Advanced micro devices.
The reason behind these investments is not that Nvidia’s chips are inadequate, but rather because these companies are looking for ways to diversify their own platforms and to create cost -saving opportunities in the process. As more chips come on the market, these products would be somewhat commoditized. In my opinion, Deepseek changes the story of chips that a product hardware product is becoming – it strengthens the idea.
Image source: Getty images.
The only area that I will admit now looks a bit blurry, is the growth process of Nvidia. I think that the arrival of Deepseek ensures that investors consider the uncomfortable (but probably) idea that the growth of Nvidia could slow down at a meaningful pace one day.
Although such worries are legitimate, Big Tech still seems to be the first in line at Nvidia. Recent comments from Meta -CEO Mark Zuckerberg and comments from Microsoft’s leadership both indicate that investments in AI infrastructure will take place for the near future.
It is difficult to determine exactly how many of those expenses will be indicated for Nvidia, but I am confident that the leading chip manufacturer will remain central in the future in the world’s best AI companies.
What is ironic is that, although the largest customers of Nvidia have publicly stated that their budgets of capital expenses (Capex) remain robust, still sell shares.
To be honest, it would not surprise me if Nvidia shares continue to experience drops until the company reports income on 26 February. Both horizon on the almost long -term.
My contrary look is that during the call of Nvidia the fourth quarter, the leadership of the company, one point will ride above all: the demand for his chips-including the newest and most expensive architecturen-strong and should have to do so for some time Continue.
As such it would not surprise me to see Nvidia shares run in an epic way. For now I see dips in Nvidia shares as incredible buying options and think that the stock will rise much higher from where today it is.
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