Fund manager Dan Niles has thrown cold water over Nvidia‘s tentative recovery from Monday’s share price fall, warning that the chipmaker’s stock might not have hit the bottom.
Shares in Nvidia slid 16.9% on Monday after Chinese startup DeepSeek claimed its free, open-source large language model was built in just two months costing $6 million, a fraction of the cost borne by other major players.
These developments have sparked concerns over how much money big tech companies will invest in AI, hitting the shares of Nvidia, a key AI chipmaker.
“Nobody questions whether Nvidia is the undisputed king and chips. What they’re questioning is how much capex do you need for things like pre-training, post-training and then inference, ultimately,” Niles, founder and portfolio manager at Niles Investment Management founder, told CNBC Tuesday.
After Monday’s share fall — which slashed more than $595 billion from the company’s valuation, the biggest single-day market cap decline on record — Nvidia shares rose nearly 9% Tuesday, but Niles has a gloomy forecast for U.S. chipmaker looking ahead.
“I think investors should be very careful about assuming that this is the bottom,” he told CNBC’s Sri Jegarath and Chery Kang on Tuesday’s “Squawkbox Asia.”
Nvidia could “absolutely” bounce back from Monday’s massive move, he said, “but if estimates have to go down from Nvidia [revenue] growing at 50% to growing at 20 to 30% I think there’s a stock has a lot more downside potentially from here.”
In a statement to CNBC on Monday, Nvidia welcomed the emergence of Chinese AI competition. A company spokesperson called DeepSeek’s R1 model “an excellent AI advancement,” indicating that the U.S.-chipmaker sees an opportunity for its graphics processing units, or GPUs.
Microsoft bets
Niles is also watching whether DeepSeek’s emergence has the potential to fracture the relationship between AI backer Microsoft, OpenAI and Nvidia.
Microsoft has been a driving force behind the ChatGPT-creator, which sparked the generative AI boom. Microsoft has poured nearly $14 billion into the AI startup to date.
Despite being “the biggest spender on AI by far, and Nvidia’s biggest customer,” Niles said Microsoft’s cap-ex could go from growing “70 to 80% to basically flat by June.”
“And so that’s the way you kind of need to think about it, because part of this is, what is the return on investment, on what you’ve spent on so far?” he said.
“And the answer has been no for them, and so we’re going to have to see how that plays out.”