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"I'm Looking For Nvidia (NVDA) Stock To Reset Down 50%"

Austin Smith

Published: February 5, 2025 2:25 pm

24/7 Wall St. Key Points:

• If China’s DeepSeek AI efficiency claims are to be believed, NVIDIA (NASDAQ: NVDA) may suffer a substantial valuation reset with reduced demand for GPUs.
• Meta (NASDAQ: META) might benefit from this development by drastically cutting its planned $50 billion AI infrastructure investment if DeepSeek proves cost-effective.
• Also, with Nvidia looking fully valued, The Next Nvidia stocks look better than ever. Click here to learn more.

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Transcript:

[00:00:04] Doug McIntyre: I’m looking for Nvidia stock to reset down 50%. And I’m going to give you my case. Nvidia. Looks like Amazon (NASDAQ: AMZN) did during the dot com bubble. Okay. It’s a great company. No question about it It is a company that’s just hit a whatever a perceived wall. Which I think is a real wall and that is is that the the new Chinese DeepSeek probably does not need The level of processing power that all the U.S. companies who’ve moved into AI, I mean, Microsoft (NASDAQ: MSFT), OpenAI, they all think you need Musk’s XAI. I mean, you go outside of Memphis, he’s got server farms that are, you know, the size of the city of Washington, D.C. If If the impression that we have about the, the, the Chinese DeepSeek is right. The, the cost of creating that is about 5 percent of what it has been for open AI to create its, its own, its own chat function.

[00:01:10] Lee Jackson: They say that it’s as good as Chat GPT.

[00:01:13] Doug McIntyre: I have to tell you something. NVIDIA came out and said they thought it was very good. I don’t know if you saw that yesterday, but they, to me, if your stock is going down because of something saying how great it is, I don’t think I’d do that. No, I don’t think I would either.

[00:01:29] Doug McIntyre: So what I’m talking about is I’m talking about a reset that goes back a year. I’m talking about to reset down to where it was when people thought it was a graphics chip, uh, or gaming chip company. That would be a big reset. So they’ve said that revenue in the quarter they’re about to announce will be 35 billion.

[00:01:50] Doug McIntyre: It’s believable because it’s basically before any of this came out. Sure. But if they guide in any way in a direction that indicates that the DeepSeek product is going to change demand for their chips, I expect to see one of those, it’s a really great company selloffs, right? The stocks run a hundred percent.

[00:02:12] Doug McIntyre: So if you said to me, it’s going to retrace. Because there’s a brave new world to me. That’s just like the brave new world that Amazon had when the dot com bubble ended. It was a great company. It just, it got dragged down by what was a new, basically global reality in the sector they’re in.

[00:02:32] Doug McIntyre: So I’m, I’m going to make a prediction now, and that is within the next six months, NVIDIA is 50 percent below its peak. Not where it is now.

[00:02:44] Lee Jackson: The 150 level on a split adjustment basis.

[00:02:49] Doug McIntyre: To be fair, it lost 17 percent of that. So I’m about a third. It’s recovered some a little bit today, but I’m, I’m hedging my bet. You know, the first piece, third of that I’ve got on the sort of downlay.

[00:03:03] Doug McIntyre: But, um, it worries me that when you have what is probably a sea change, even if you’ve got a great company,

[00:03:14] Lee Jackson: Well and it’s like everything else at some point, you know, there’s an old adage on Wall Street that kinda relates to Las Vegas, that they, they don’t build those big casinos ’cause the house goes, doesn’t win.

[00:03:27] Lee Jackson: You know, and there’s a point when, when the big money, the huge money that’s been in for a long time, they’re going to take some of their chips off the table. And I think if we have people watching right now that have positions in NVIDIA and they’re up huge, take some of it off for goodness sakes, because one interesting thing about the big sell off because of the deep sink is that it’s spread like a contagion through the whole industry.

[00:03:55] Lee Jackson: Anything that was the least bit AI related. And this is what I thought was interesting. One of the big losers on the big sell off day was Vistra (NYSE: VST), utility company that got the big AI data warehouse boost. It was down almost 30 percent and so, so was some of the other top. That’s

[00:04:15] Doug McIntyre: if you, if you walk down that sidewalk, it’s, If DeepSeek uses much, much less energy and processing power, then it means Nvidia is in very big trouble.

[00:04:30] Doug McIntyre: It doesn’t mean they go, the chips are still, they’re the world class chips. The question is do you need as many of them? And that means, do you need huge AI server farms? Do you need them at the level they are now? That’s where the utilities get hit. Yeah. This whole idea of I own a utility and uh, you know, the, the amount of electricity that these guys are going to need is massive.

[00:04:54] Doug McIntyre: So I’m going to get a bunch of private equity guys and I’m going to put together joint ventures and Microsoft and Amazon are going to come in and be my partners. Again, the minute that NVIDIA said that it was really good, I said to myself, if anybody knows if it’s good or not, if anybody knows it’s NVIDIA.

[00:05:14] Lee Jackson: And you can bet that they had a heads up before even this big announcement out of China. They had a heads up that this was coming. And, you know, it can always be proven that, oh, it’s not as great as they say. And, you know, people can get in there. But the one thing that was interesting, the DeepSeek app on the Apple Store knocked, knocked Chat off as the number one downloaded app.

[00:05:39] Lee Jackson: And as I recall, I think you downloaded it.

[00:05:42] Doug McIntyre: Oh, sure. No, listen, they were having trouble because the demand was so great. But

[00:05:46] Lee Jackson: yeah, yeah, they had to tap the brakes. And so, you know, the truth always usually lies somewhere in the middle. And, uh, it may not be as great as the data coming out of China says, and it may not be as bad as some people think.

[00:06:01] Lee Jackson: It could be so, but you’re right. If it’s anywhere close to being competitive, that is going to reset the table in a big way.

[00:06:09] Doug McIntyre: Now I’ll tell you who this might be good for. It might be good for Meta. So Meta just announced, I think of 50 billion plus. investment in basically building out the capacity for them to run all their AI applications.

[00:06:25] Doug McIntyre: They probably haven’t spent all that money yet, so they may not have spent any of it. This is a chance for Zuckerberg to say, You know, I may be able to do this for 7 billion. All of a sudden,

[00:06:37] Lee Jackson: Just remember he he’s lit cash on fire before. So I know. Okay. And I bet he hasn’t committed 50 or 60 billion yet.

[00:06:46] Lee Jackson: But yeah, that may change his whole assessment depending on how things go. But yeah, the boy, and it came out of nowhere. You know, it was it was, you know, like Mike Tyson said, everybody’s a tough guy to get smashed in the face.

[00:07:01] Doug McIntyre: Well, I mean, I’ll close this segment by simply saying this. If people want to know what happened, go back and look at a chart of 1999 and 2000 on the NASDAQ and watch the day that things turned ugly.

[00:07:15] Doug McIntyre: Watch how fast it fell. I’m telling you all something that has happened before in the history, uh, of the stock market. Yep. Having a great company does not mean your stock goes up forever.

[00:07:27] Lee Jackson: No. And I had a front row seat to it. I was right there and, and all of a sudden, 99 turned into 2000. And boy, when it took off.

[00:07:35] Lee Jackson: You know, to the downside, it was nonstop.