DeepSeek V4 Is Coming This Month. Why It Could Rattle the Markets, Again.

It was a little more than a year ago that tech stocks fell sharply and briefly due to concerns that an artificial intelligence (AI) chatbot from a Chinese-based company, DeepSeek, could offer significant competition to ChatGPT and other models. While that led to a brief decline for Nvidia (NASDAQ: NVDA) and other tech stocks, they did end up recovering.

But the concern around heavy spending on AI continues to weigh on investors' minds these days. And those fears may reach new heights as DeepSeek may be about to release its newest model sometime this month.

Image source: Getty Images.

The new DeepSeek could again be better than ChatGPT

The latest DeepSeek model, V4, is expected to come out later this month -- potentially around Lunar New Year. And according to reports, it outperforms ChatGPT and Claude, particularly on tasks that involve long coding prompts. If true, it could deal a blow to Nvidia and other tech stocks yet again.

If there's a cheaper and more efficient model that is able to keep up with top U.S. chatbots, that will once again raise question marks about whether the level of AI spending is truly justifiable. While it may be tempting to assume it's just going to be a repeat of last year, there is arguably a bit more concern around AI spending nowadays, as tech companies continue to announce increases in capital expenditures.

Even if DeepSeek v4 isn't as good as all U.S. chatbots, if it shows that it can offer formidable competition, that may be enough to disrupt the markets once again.

Should you buy Nvidia's stock if it falls?

Nvidia's stock fell briefly but suddenly last year due to the release of DeepSeek's AI model, and buying it on weakness would have yielded some fantastic returns for investors. If there's another similar type of sell-off in Nvidia's share price, it could be a great move to buy the AI stock, given its potential to continue to grow in the future.

The company has established itself as a leader in AI, and with some strong results over the years, the stock isn't terribly expensive. Nvidia currently trades at a forward price-to-earnings multiple of 24, which is based on analyst projections of how it will perform in the year ahead. That's not a whole lot higher than the 22 times forward earnings that the average stock on the S&P 500 trades at. Even a modest decline in Nvidia's stock could make it a cheap-looking investment, particularly if you're looking to buy and hold the stock for the long haul.

While not all AI stocks may be good buys on weakness, Nvidia may be one of the better ones to load up on.

David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.