DeepSeek chip push unlikely to hurt Nvidia, analyst says

On July 7, Reuters reported that Chinese tech startup DeepSeek is developing its own AI chips in an effort to reduce its reliance on Nvidia chips. The news triggered a sell-off in Nvidia stock, with shares sliding about 1.6% in premarket trading.

However, analyst Richard Windsor of Radio Free Mobile argues that DeepSeek's effort is unlikely to materially damage Nvidia's AI chip business. Windsor pointed to two critical factors. First, he noted that Nvidia is "at zero in China and staying there," a reference to Nvidia's already diminishing business in China as a result of U.S. restrictions on chip exports to the country. Second, Windsor stated that DeepSeek has almost zero chance of challenging Nvidia outside China. China is excluded from access to the world's most advanced chip manufacturing capabilities, and designing competitive AI chips demands years of development and substantial capital investment—constraints that present an enormous hurdle to any Chinese competitor.

Nvidia Corp is an American semiconductor company that designs and manufactures powerful computer chips used across a broad range of applications. Nvidia chips are widely deployed to train and operate large AI models, and the company also supplies software solutions to the AI industry. As of the reporting period, Nvidia stock is favored by elite investors, with some 275 hedge funds holding positions in the company.

The report of DeepSeek's chip development effort briefly rattled markets, reflecting investor concern about competition to Nvidia's dominant AI chip franchise. However, the structural constraints are substantial. Nvidia's presence in China has already shrunk due to longstanding U.S. export controls, so DeepSeek's move to develop domestic chips addresses a market Nvidia has largely already lost. The deeper barrier lies in manufacturing and R&D: China lacks access to cutting-edge chip fabrication technology, a prerequisite for building AI chips competitive with Nvidia's offerings. Windsor's analysis suggests that the time and capital required to field a rival chip—years of development and billions in investment—place such a project far outside DeepSeek's near-term reach, especially in competition with Nvidia's established ecosystem and technical lead globally.

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