Nvidia (NVDA), Broadcom (AVGO) and many other companies are facing a "new but unverified risk" from China-based artificial intelligence software start-up DeepSeek, Truist Securities said Monday in a note to clients.
Benchmark US stock measures were in the red in recent Monday trading following media reports that DeepSeek is offering an open-source model at a significantly lower cost than its US counterparts.
"We cannot determine the veracity of DeepSeek's claims," Truist said. "If they're true, it magnifies the already-known risk of an AI spending slowdown."
The private Chinese firm claimed that its AI model rivals the performance of western AI models using inferior semiconductor technology and less compute time, adding that its V3 AI model was developed for about $5.6 million and trained in around 55 days using 2,048 Nvidia H800 chips, versus OpenAI's GPT-4 AI model that was trained using Nvidia H100 chips, with training costs estimated at more than $100 million, according to the note.
If DeepSeek's claims are verified, this development is "deeply concerning for the AI spend cycle" and "there will surely be periods of negative growth in the future," Truist said.
Other companies facing a potential downside include Taiwan Semiconductor Manufacturing (TSM), Marvell Technology (MRVL), Super Micro Computer (SMCI), Dell Technologies (DELL) and Micron Technology (MU), Truist said.
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