DeepSeek Hits a Wall as U.S. Chip Ban Chokes Nvidia (NVDA) Supply
Chinese AI firm DeepSeek could be facing major setbacks in developing and releasing its next large language model, known as R2, due to tightening U.S. export controls on Nvidia's (NVDA) most advanced chips. Indeed, according to The Information, the company's current models are heavily optimized for Nvidia's hardware, especially the H20 chip, which was previously the most powerful AI chip legally available to China. However, a new U.S. ban on the H20 has created a supply crunch that is leaving DeepSeek and its partners scrambling for alternatives. As a result, this shortage is expected to slow the adoption of R2, particularly within China, where demand for AI models is growing rapidly.
Confident Investing Starts Here:
It is worth noting that DeepSeek has not yet set a launch date for R2, as CEO Liang Wenfeng is reportedly unsatisfied with the model's current performance, and engineers are still refining it before release. Internally, the company has been working closely with major Chinese cloud providers by sharing technical specifications to help them prepare for R2 deployment. But the ability of these cloud platforms to meet demand is uncertain, as most customers using DeepSeek's previous model, R1, rely on the now-restricted H20 chips.
While companies like Huawei offer domestic alternatives to Nvidia chips, DeepSeek's models are so closely tied to Nvidia's hardware and software ecosystem that switching would significantly reduce performance and efficiency. In fact, R1's success earlier this year led to a surge in orders for H20 chips from tech giants like ByteDance, Alibaba (BABA), and Tencent (TCEHY), who spent $16 billion on 1.2 million chips in early 2025. With no further H20s available, Chinese firms have resorted to using gaming GPUs like the RTX 4090, which are also restricted but more easily accessible on the black market. For now, R2's success may depend on how long China's current H20 supply can hold out.
What Is a Good Price for NVDA?
Turning to Wall Street, analysts have a Strong Buy consensus rating on NVDA stock based on 35 Buys, four Holds, and one Sell assigned in the past three months, as indicated by the graphic below. Furthermore, the average NVDA price target of $175.28 per share implies 12.2% upside potential.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
CNBC
23 minutes ago
- CNBC
Track and yield: Nike earnings boost European sportswear stocks
Nike says tariffs could add around $1 billion to its costs this trading year as it looks to reduce its reliance on Chinese production in a bid to offset the impact of President Trump's trade policy.
Yahoo
33 minutes ago
- Yahoo
Nvidia 'fueling the AI revolution': Can it hit $5T market cap?
Nvidia (NVDA) stock keeps climbing as the artificial intelligence (AI) trade accelerates. Dan Ives, Wedbush Securities managing director and global head of technology research, joins Market Catalysts to explain why he sees Nvidia hitting a $5 trillion market cap and why Palantir (PLTR) could follow with a $1 trillion valuation. To watch more expert insights and analysis on the latest market action, check out more Market Catalysts here. Dan, great to have you on the program with us. We saw strong third quarter results from Micron boosted by AI demand, so how does this factor into the broader AI trade and add just another thought in the frame of mind for some of the Nvidia investors out there as well? I mean, there's one chip fueling the AI revolution and that's Nvidia. And I think investors are starting to recognize we haven't even seen the biggest growth driver yet of AI. Not not just an enterprise and the use cases, but on the consumer side, ultimately autonomous and robotics. And I just, this is, in my view, it's not just four trillion, I mean, we're going to be looking at five trillion dollar market cap in Nvidia. And so at what point, what's the kind of modeling in the time frame that you're kind of anticipating that that could come to fruition? Street's still underestimating growth longer term. I think by 15 to 20%, that could be conservative. I think when you actually see the dynamics playing out today, remember they took China basically out of their forecast. And if you have any trade deal, a big chip on the table is Nvidia and I believe they're not going to hand that business on a silver platter to Huawei. I think right now investors are starting to recognize the growth opportunities for Nvidia and we've talked about demand to supply, 10 to one. And so as we're thinking about that and you mentioned China, one of the major factors within any type of trade deal is going to be IP, that intellectual property. What is the likelihood that we see an outcome on the intellectual property front that is favorable for Nvidia and what does that do in terms of unlocking some of that addressable market? I think probably less for Nvidia from an IP perspective. And the bigger issue from an IP especially a lot of the software players, that's been the big issue when it comes to China. But look, there's a give and take here. And the reality is that Jensen wants that business back, he's talked about it. And you know, when you think about it, eight billion a quarter, but eventually that could be 10, 12 billion a quarter. But China, they know that there's only one chip in the world fueling AI revolution. That's the Godfather of AI, Jensen Nvidia. You know, we've heard, we've heard some really strong calls for even six trillion dollar market caps for Nvidia here. What is you think the the critical kind of checklist in order for us to get to that point? I think checklist is, and just take all the geopolitical out for a second, but I think first, it's the use cases that are now exploding. And we're seeing on the hyperscale and Microsoft, of course names like Palantir which continues to be one of our top names. Then it's the consumer piece, you know, everything Zuckerberg and Met is doing and what we're seeing with Alpha and others, because that's a whole another leg to the stool in terms of the consumer side. And then the Holy Grail, autonomous robotics, humanoids, that's not even being factored in here today. And so you mentioned a few of the other things that I wanted to get to as well here. You of course are tracking Palantir and another name that's seen new record highs. What do you think is really contributing to the mindset around the trading and the thesis for Palantir right now? Look, I mean, they hated at 20, despised at 70, called expensive at 100, right? I mean, now the bear is 145 because as we always say, they they can't find AI and spreadsheets when they're in hibernation mode. Palantir we view as a trillion dollar market cap in the next two or three years. There is no company from a software perspective that has what they have. And I think now as they go further and further after the enterprise, as sovereigns go down the AI path, this is just the beginning of what's going to be a golden age of Palantir. And I think, look, is it expensive today? Of course, but if you look out two, three, four years, I mean, we're going to be talking about one of most transformational companies in the world. Erreur lors de la récupération des données Connectez-vous pour accéder à votre portefeuille Erreur lors de la récupération des données Erreur lors de la récupération des données Erreur lors de la récupération des données Erreur lors de la récupération des données
Bloomberg
an hour ago
- Bloomberg
Nvidia Breakout Puts $4 Trillion Market Value Within Reach
Two years after Nvidia Corp. made history by becoming the first chipmaker to achieve a $1 trillion market capitalization, an even more remarkable milestone is within its grasp: becoming the first company to reach $4 trillion. After the emergence of China's DeepSeek sent the stock plunging earlier this year and stoked concerns that outlays on artificial intelligence infrastructure were set to slow, Nvidia shares have rallied back to a record.
