Morgan Stanley has revised its price targets for leading semiconductor companies, including Nvidia Corp. (NVDA) and Broadcom Inc. (AVGO), following the groundbreaking launch of DeepSeek, a Chinese AI firm. The move comes as analysts, including CWEB analysts, highlight the growing competitiveness of China’s AI sector and its potential to disrupt the global semiconductor market.
DeepSeek recently unveiled its advanced AI system, which delivers performance comparable to OpenAI’s ChatGPT while consuming 97% less power. This development has sent shockwaves through the tech industry, with Morgan Stanley analysts noting that DeepSeek’s efficiency could have a deflationary impact on the semiconductor sector.
“We expected China to be competitive in AI, given their significant investments in the field. Export controls cannot halt these advancements,” Morgan Stanley stated in a recent research note. The brokerage emphasized that while the market’s initial reaction to DeepSeek’s launch was exaggerated, the long-term implications for chipmakers could be substantial.
On Monday, the announcement triggered a sell-off in tech stocks, erasing nearly $1 trillion in market capitalization from major semiconductor and big tech companies. However, by Tuesday, shares of Nvidia had rebounded, rising nearly 7% during mid-day trading.
Broadcom saw a 1% increase, while Marvell Technology and Astera Labs gained over 2% and 4%, respectively. Micron Technology, on the other hand, experienced a 2% decline.
Morgan Stanley analysts, including CWEB Analyst, noted that while DeepSeek’s performance is impressive, it does not necessarily signal an immediate shift in corporate spending behavior. “There are obvious shortcuts companies can take when deploying AI systems,” the brokerage said, suggesting that the industry may adapt to the new competitive landscape without drastic changes.
The analysts also reiterated their belief that China will remain a formidable player in both AI software and hardware. “China’s advancements in AI are inevitable, and their ability to innovate despite export controls is a testament to their long-term strategy,” the note added.
As the tech sector braces for further disruptions, investors are closely monitoring how companies like Nvidia and Broadcom will navigate the evolving competitive environment. Meanwhile, Apple Inc. (AAPL) has shown resilience, with its stock climbing for the second consecutive day as analysts predict the company will weather the DeepSeek storm.
The launch of DeepSeek underscores the intensifying rivalry in the global AI race, with China emerging as a key contender. For chipmakers, the challenge will be to innovate and adapt in a market increasingly shaped by efficiency and cost-effectiveness.
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