The stock market remains a realm of unpredictability, where adverse news can bolster a stock’s value while positive earnings reports may trigger a decline. This dynamic is a fundamental trait of market behavior.
Nvidia is a case in point. The company is navigating the turbulent waters of the AI sector following the recent debut of a major AI model by DeepSeek. Despite the launch of its eagerly awaited RTX 5090 and 5080 graphics cards, Nvidia’s stock shows a continuing downward trend.
What might be causing this unexpected stock performance? Let’s delve deeper.
Nvidia RTX Series Supply Challenges
There’s significant online demand for Nvidia’s new RTX 50 series graphics cards, but this hasn’t translated into strong sales figures. The root of the issue lies in inventory shortages.
Many retailers experienced sell-outs within minutes of the graphics cards’ release, with scalpers now charging premium prices in the aftermarket. Customers have been informed by some retailers to expect long wait times and backorders for the RTX 5090 and 5080.
While demand exists, it’s evident that it doesn’t solely account for the scarcity of Nvidia’s RTX 50 series in stores. Reports indicate that retailers received minimal stock due to Nvidia’s manufacturing setbacks.
These supply challenges may not directly explain Nvidia’s stock decline, but they highlight the company’s reliance on the RTX 50 series launch as a catalyst for its recovery.
The Challenge from DeepSeek
Nvidia, along with other U.S.-based AI firms, faces stiff competition from the recent advancements made by DeepSeek, a startup from China that has released the DeepSeek-R1 AI model.
DeepSeek’s new AI model is reported to be comparable to the latest models from leading U.S. companies, developed at significantly lower costs—less than $6 million compared to the hundreds of millions spent by some competitors.
Historically, Nvidia has played a crucial role in providing processing power for AI development among U.S. tech firms. However, the emergence of DeepSeek poses an ongoing challenge, as the startup continues to release advanced AI capabilities, including models for AI-generated imagery, and is developing even more sophisticated technology.
Furthermore, other Chinese companies, including major players like Alibaba, have announced their plans to introduce powerful AI models that could surpass existing offerings.
Implications of Tariffs on Chip Manufacturing
This week has been particularly challenging for Nvidia, further complicated by U.S. tariffs proposed by President Trump aimed at relocating computer chip production from Taiwan to the United States.
During a recent address, Trump announced a significant tariff plan intended to curb foreign production of essential goods, including semiconductors, highlighting companies like Nvidia and others that rely on Taiwanese manufacturing.
Trump indicated that the tariffs could reach as high as 100 percent, raising concerns over increased consumer prices for these products, which could result in lower sales or diminished profitability for companies like Nvidia.
