Nvidia faces a critical earnings report on Wednesday as investors await CEO Jensen Huang’s response to the market turbulence triggered by Chinese startup DeepSeek’s breakthrough AI model. The chip giant experienced the largest single-day market capitalization loss in US history—$600 billion—after DeepSeek released its R1 open-source reasoning model, which reportedly achieved performance comparable to OpenAI’s o1 model while using fewer and less powerful chips.
The DeepSeek announcement shook fundamental assumptions about AI infrastructure requirements. Barclays analysts noted that “DeepSeek’s remarkable feat has shaken the industry’s assumptions about how much capital or GPU chips a company needs to stay ahead of the competition.” This raised concerns about whether demand for Nvidia’s high-powered GPUs would decline if AI models could be trained more efficiently.
However, analysts remain optimistic about Nvidia’s data center revenue, pointing to massive infrastructure commitments from major tech companies. OpenAI’s Stargate project plans to spend up to $500 billion on AI infrastructure, while Meta has allocated $65 billion for data center spending this year, and Amazon forecasted $100 billion in computing power investments. Bank of America analyst Vivek Arya emphasized that “there is no change thus far to spending intentions at NVDA large customers including Microsoft and Meta.”
Investors will closely watch the rollout of Nvidia’s Blackwell chip series, the company’s latest and most powerful offering. Despite initial manufacturing and overheating challenges, analysts expect strong ramp-up numbers. Daniel Morgan from Synovus noted that “demand for Blackwell is very strong and will outstrip supply for several quarters.” UBS analysts predict the fourth quarter was the last where Blackwell wouldn’t dominate GPU sales, with higher profit margins expected from the new chips.
Inference workloads—the process of using and improving trained AI models—represent another growth area. Increased inference demand signals that consumers and businesses are finding real value in AI applications. Huang previously highlighted inference growth across Nvidia’s platforms during the November earnings call.
External factors add complexity to Nvidia’s outlook. President Trump’s trade policies, including potential tariffs on Taiwan (home to chip manufacturer TSMC) and ongoing China export restrictions on high-powered chips, could impact costs and market access. Huang met with Trump at the White House last month, though discussion details remain undisclosed.
Key Quotes
DeepSeek’s remarkable feat has shaken the industry’s assumptions about how much capital or GPU chips a company needs to stay ahead of the competition.
Barclays analysts wrote this assessment last month, capturing how DeepSeek’s efficient AI model challenged fundamental assumptions about the relationship between computational resources and AI performance, directly threatening Nvidia’s growth narrative.
Despite DeepSeek’s supposed ‘revolutionary’ optimizations, there is no change thus far to spending intentions at NVDA large customers including Microsoft and Meta.
Bank of America analyst Vivek Arya provided this reassurance to investors in early February, suggesting that major tech companies remain committed to massive GPU purchases despite DeepSeek’s claims of greater efficiency.
Demand for Blackwell is very strong and will outstrip supply for several quarters.
Daniel Morgan, senior portfolio manager at Synovus, emphasized continued strong demand for Nvidia’s latest chip series despite manufacturing challenges, indicating that concerns about reduced GPU demand may be premature.
Our Take
The DeepSeek episode reveals a fundamental tension in AI development: efficiency versus scale. While DeepSeek demonstrated that clever engineering can reduce resource requirements, the industry’s continued massive investments suggest that raw computational power still matters for frontier AI development. This isn’t necessarily contradictory—efficiency gains may simply enable more ambitious projects rather than reducing overall spending.
Nvidia’s real challenge isn’t just defending current demand, but demonstrating sustainable long-term growth as AI matures from training-focused to inference-focused workloads. The company’s software ecosystem and application layer become increasingly critical as pure chip sales face potential commoditization. The geopolitical dimension—Trump’s tariff threats and China export restrictions—adds unpredictable risk that could reshape global AI supply chains regardless of technical merit. Huang must convince investors that Nvidia remains indispensable across the entire AI stack, not just as a chip supplier.
Why This Matters
This earnings report represents a pivotal moment for the AI industry’s infrastructure narrative. DeepSeek’s emergence challenged the prevailing assumption that AI leadership requires massive capital expenditures and vast GPU clusters, potentially disrupting the economics of AI development. If efficient training methods become standard, it could democratize AI development and reduce barriers to entry for smaller players.
However, the continued massive spending commitments from tech giants suggest the industry still believes computational power remains essential for achieving artificial general intelligence (AGI) and maintaining competitive advantages. Morgan Stanley analysts noted that “model builders and hyperscalers still had their eyes on artificial general intelligence” regardless of DeepSeek’s efficiency gains.
Nvidia’s response will shape investor confidence not just in the company, but in the broader AI infrastructure thesis that has driven trillions in market value. The shift toward inference workloads and AI applications also signals market maturation—moving from pure research and training toward practical deployment. This transition could determine which companies capture long-term value in the AI ecosystem and whether the current investment levels are sustainable or represent speculative excess.
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Source: https://www.businessinsider.com/deepseek-impact-nvidia-investors-call-2025-2