It is Time to Sell AI Stocks

The meteoric rise of artificial intelligence (AI) has fueled a prolonged FOMO rally rarely seen in history.?

Few companies have benefited more from this than NVIDIA, whose graphics processing units (GPUs) have become the backbone of modern AI development.?

However, with the release of China's Deepseek R1 AI model, it’s time to ask: Is NVIDIA—and AI stocks in general—ready for a deep correction? The answer may lie in emerging competition in the AI landscape.

While the AI revolution is undoubtedly transformative, the emergence of competitors like Deepseek R1, as you see below, suggests that the market may be overestimating the dominance of U.S. tech giants.?

China’s ability to develop top-tier AI models with minimal hardware inputs signals a new era of competition—one that may reshape the industry’s future.

The NVIDIA Hype Machine

NVIDIA has seen its valuation soar as demand for GPUs, particularly for AI applications, has skyrocketed.

From powering OpenAI’s GPT models to serving as the hardware foundation for countless AI startups. NVIDIA’s technology is far reaching but its stock price reflects unachievable promises of AI-driven growth.

You see the AI-driven rally in NVIDIA’s valuation does not fully account for the emerging competition from China’s Deepseek R1, which showcases how countries are developing AI technologies that challenge the status quo.

Deepseek R1: A New Challenger in the AI Landscape

China’s Deepseek R1 is an advanced AI model that exemplifies efficiency. Built with fewer, less powerful chips, it manages to compete globally with top-tier AI systems.

Its development aligns with China's strategic goal of achieving technological self-reliance, reducing dependence on Western hardware like NVIDIA GPUs.

The key innovation of Deepseek R1 lies in its resource efficiency. By optimizing software and leveraging cost-effective hardware, China has demonstrated that top-tier AI performance does not necessarily require high-powered GPUs.

This undermines NVIDIA’s position as an indispensable supplier for AI development and raises questions about the sustainability of its sky-high valuation.

What the Experts are Saying

We also must consider what the experts are saying about China’s Deepseek R1 product …

Marc Andreesen the cofounder of the highly successful venture capital firm Andreessen Horowitz and the innovator and creator of software projects used by billions of people around the world, had this to say about about Deepseek R1:

“Deepseek R1 is one of the most amazing and impressive breakthroughs I’ve ever seen — and as open source, a profound gift to the world.”

Microsoft CEO Satya Nadella said at the World Economic Forum, on Wednesday … "We should take the developments out of China very, very seriously.”?

So consider the fact that the experts in the field believe Deepseek is on par with the western OpenAI model yet it is 27x cheaper. Meanwhile, AI accelerator revenues are projected to reach $1 trillion by 2030.

Implications for NVIDIA and AI Stocks

The release of Deepseek R1 underscores the growing maturity of global AI ecosystems. It challenges the narrative that American firms like NVIDIA and OpenAI hold an invincible lead.

While NVIDIA remains a dominant force, the rise of efficient and affordable alternatives could significantly reshape the competitive landscape.

Conclusion: A Wake-Up Call for Investors

Investors should think hard about taking some chips off the table in NVIDIA. While the AI revolution is undoubtedly transformative, the emergence of competitors like Deepseek R1 suggests that the market may be overestimating the dominance of U.S. tech giants.

AI stocks, including NVIDIA, may be poised for a correction that aligns valuations more closely with the realities of a rapidly diversifying global AI ecosystem.

NVIDIA’s Chart Pattern

Two important points on the NVIDIA stock chart below: Notice the volatility over the past 4 months during a long consolidation period following an over 30% correction that began in May ‘24.

Number 2: check out the sell signal on the RSI showing a downtrend in strength during the price uptrend over the past year.

The NVIDIA Hype Machine

NVIDIA has seen its valuation soar as demand for GPUs, particularly for AI applications, has skyrocketed.?

From powering OpenAI’s GPT models to serving as the hardware foundation for countless AI startups. NVIDIA’s technology is far reaching but its stock price reflects unachievable promises of AI-driven growth.

You see the AI-driven rally in NVIDIA’s valuation does not fully account for the emerging competition from China’s Deepseek R1, which showcases how countries are developing AI technologies that challenge the status quo.?

Deepseek R1: A New Challenger in the AI Landscape

China’s Deepseek R1 is an advanced AI model that exemplifies efficiency. Built with fewer, less powerful chips, it manages to compete globally with top-tier AI systems.?

?Its development aligns with China's strategic goal of achieving technological self-reliance, reducing dependence on Western hardware like NVIDIA GPUs.

The key innovation of Deepseek R1 lies in its resource efficiency. By optimizing software and leveraging cost-effective hardware, China has demonstrated that top-tier AI performance does not necessarily require high-powered GPUs.?

This undermines NVIDIA’s position as an indispensable supplier for AI development and raises questions about the sustainability of its sky-high valuation.

What the Experts are Saying

We also must consider what the experts are saying about China’s Deepseek R1 product …?

Marc Andreesen the cofounder of the highly successful venture capital firm Andreessen Horowitz and the innovator and creator of software projects used by billions of people around the world, had this to say about about Deepseek R1:?

“Deepseek R1 is one of the most amazing and impressive breakthroughs I’ve ever seen — and as open source, a profound gift to the world.”?

Microsoft CEO Satya Nadella said at the World Economic Forum, on Wednesday … "We should take the developments out of China very, very seriously.”? ?

So consider the fact that the experts in the field believe Deepseek is on par with the western OpenAI model yet it is 27x cheaper. Meanwhile, AI accelerator revenues are projected to reach $1 trillion by 2030.

Implications for NVIDIA and AI Stocks

The release of Deepseek R1 underscores the growing maturity of global AI ecosystems. It challenges the narrative that American firms like NVIDIA and OpenAI hold an invincible lead.?

While NVIDIA remains a dominant force, the rise of efficient and affordable alternatives could significantly reshape the competitive landscape.

Conclusion: A Wake-Up Call for Investors

Investors should think hard about taking some chips off the table in NVIDIA. While the AI revolution is undoubtedly transformative, the emergence of competitors like Deepseek R1 suggests that the market may be overestimating the dominance of U.S. tech giants.?

AI stocks, including NVIDIA, may be poised for a correction that aligns valuations more closely with the realities of a rapidly diversifying global AI ecosystem.

NVIDIA’s Chart Pattern

Two important points on the NVIDIA stock chart below: Notice the volatility over the past 4 months during a long consolidation period following an over 30% correction that began in May ‘24.?

Number 2: check out the sell signal on the RSI showing a downtrend in strength during the price uptrend over the past year.

The Bottom Line

With VIVIDIA volatility coming off with the rest of the markets since the start of the year, put options look cheap. This allows investors that do not want to close out existing long positions to purchase cheap protection.

If the $130 price, which sits at the bottom of the above range were taken out you could see a quick move lower. So buying 1-month puts at that price may make sense.

For long term holders taking profits here and waiting for another 10 - 20% correction may be an even better option.?

Creditable competition, especially at much lower costs is certainly enough of a reason to act.?

Live and Trade With Passion My Friends,

Bill Griffo?