Jim Cramer believes DeepSeek is no longer a threat to tech giants, AI stocks are gaining

Jim Cramer said on Tuesday that the Chinese startup DeepSeek no longer poses a threat to outpace the tech titans currently leading in the artificial intelligence space. He noted investors who abandoned stocks on Nvidia, AMDs, Vertices, Microns, and Marvell Technologies are now back.

DeepSeek released an AI model in January that seemed as advanced as competitors, requiring far less money and energy. Wall Street panicked at the news, fearing Big Tech had spent too much building data centers and AI models. It resulted in many companies in the industry experiencing a drop in their stocks.

AI tech giants draw investor faith from DeepSeek

The buzz over DeepSeek this week crystallized, for many people, a few important trends that have been happening in plain sight: (i) China is catching up to the U.S. in generative AI, with implications for the AI supply chain. (ii) Open weight models are commoditizing the…

— Andrew Ng (@AndrewYNg) January 30, 2025

Jim Cramer told investors that Wall Street no longer seems concerned about the potential for Chinese startups to outpace tech giants in the AI industry. Investors had abandoned the tech giants after DeepSeek threatened the sector by revealing its cheap production compared to other companies.

AI firm Nvidia, whose market cap has surged quickly over the past few years as the tech space clamored for its products, dropped 17% in one session. The semiconductor producer lost close to $600 billion, marking the largest single-day drop for a U.S. company.

Cramer argued that the recovery of many AI stocks shows that fears about DeepSeek’s dominance are short-lived. He said the rally also refutes the idea that China had beaten the U.S. in the AI arms race.

“Now, looking back, with so much of tech bordering on new highs, it’s clear that these stocks never should’ve been sold in the first place. Because DeepSeek simply wasn’t that meaningful.”

–Jim Cramer, American Author and TV Personality.

The American TV personality mentioned that Wall Street’s DeepSeek panic is a “microcosm” of the kind of situations that cause investors to make mistakes and unnecessarily write off certain stocks. Cramer believes many investors did not question DeepSeek’s assertions, even as some experts warned the data could be misleading.

U.S. indexes jumped higher on Monday as Wall Street bet that the cease-fire in the Middle East would take effect. The Dow Jones Industrial Average climbed 1.19%, the S&P 500 rose 1.11%, and the Nasdaq Composite jumped 1.43%.

Semiconductor stocks also saw an incline during the session, as Broadcom soared to new heights, up 3.94%, while Nvidia and Advanced Micro Devices gained 2.59% and 6.83%, respectively. The Nasdaq 100 also hit a new all-time closing high, finishing up 1.53%.

DeepSeek evades chip export controls

An unnamed senior State Department official told Reuters in an interview that the Chinese AI startup sought to use Southeast Asian shell companies to obtain high-end Nvidia chips, including H100 chips, which cannot be shipped to China under U.S. rules. The U.S. official’s comment showed that DeepSeek’s fast-growing AI capabilities were exaggerated, as the company still relied heavily on U.S. technology.

The official also warned that the Hangzhou-based AI firm had provided user information to the Chinese government but had declined to comment on whether the U.S. would implement further export controls or sanctions against the Chinese AI startup. An Nvidia spokesperson confirmed that the company’s review indicates that the Chinese AI startup used lawfully acquired H800 products, not H100.

A study published by DeepSeek’s researchers revealed the firm used 2,048 Nvidia H800 chips to train its DeepSeek-V3 large language model (LLM). According to the report, DeepSeek-V3 required 2.788 million H800 GPU hours for its complete training, meaning the total training time was about 56.7 days.

The Chinese AI company also claimed that the training cost for its AI model was only $58 million. Meta spent $500 million to train its Llama 3.1. A group of DeepSeek researchers revealed in a paper on January 22 that DeepSeek-R1’s training used the data from Alibaba’s Tongyi Qianwen (Qween) and Llama. 

Commerce Secretary Howard Lutnich said the Chinese AI company could create “dirt cheap” AI models by purchasing many Nvidia chips and stealing data from Meta’s open platform. In October 2022, the Biden administration banned the export of Nvidia’s A100 and H100 chips to China. In October 2023, it also banned the exports of the A800 and H800 chips to China.

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