
January 29,2025
Nvidia’s Market Response and Stock Impact
Nvidia has reaffirmed the importance of its chips in the Chinese market following significant advancements by Chinese AI firm DeepSeek. The company’s response comes amid a sharp decline in its stock price, which fell 17% to $118.58, driven by investor concerns that DeepSeek had achieved AI capabilities comparable to those of OpenAI while utilizing far fewer Nvidia chips than its U.S. counterparts. Shares of Nvidia’s competitor, Advanced Micro Devices (AMD), also declined by over 6%, reaching $115.01.
DeepSeek’s AI Breakthrough and Export Compliance
In a statement, Nvidia acknowledged DeepSeek’s progress, emphasizing that it highlights how AI models can be developed using widely available resources while remaining compliant with U.S. export regulations. One of DeepSeek’s research papers revealed that it utilized approximately 2,000 of Nvidia’s H800 chips—designed in accordance with U.S. export controls established in 2022. Experts have previously indicated that these regulations were unlikely to significantly impede China’s AI development.
Future of Nvidia Chips and Regulatory Concerns
The U.S. imposed these microchip export restrictions to hinder China’s progress in developing supercomputers for nuclear weapons research and artificial intelligence systems. According to Jimmy Goodrich, a senior technology adviser at the RAND Corporation, multiple supercomputers in China still contain substantial numbers of Nvidia chips that were legally acquired before the latest restrictions. He noted that DeepSeek’s efficiency improvements were a result of years of experience in AI model development.

“DeepSeek didn’t emerge suddenly—they have been working on model-building for years,” Goodrich stated. “It has long been known that DeepSeek has a strong team. If they had access to even more computing power, their capabilities could be significantly greater.”
DeepSeek has recently struggled to handle a surge of new users, an issue tied to the process of AI inference, which involves running trained AI models to generate responses. Nvidia pointed out that inference operations require extensive use of Nvidia GPUs and high-performance networking, reinforcing the continued demand for its hardware.
To navigate evolving regulations, Nvidia has introduced the H20 chip, designed to comply with the latest U.S. export controls. While the restrictions limit the chip’s efficiency for AI training, Goodrich described it as “probably the best chip in the world for inference.” However, he raised concerns about potential future restrictions, asking, “How long will Washington allow the best inference chip in the world to be sold to China?”
DeepSeek signals China’s AI rise and semiconductor’s future importance.
As Nvidia continues to adapt to the shifting regulatory landscape, the broader AI industry remains watchful of how U.S. policy will shape the global technology market. The advancements by DeepSeek demonstrate China’s growing capabilities in AI development, reinforcing the ongoing strategic importance of semiconductor technology in geopolitical and economic discussions.