While companies like DeepSeek may find success in certain market segments, they face an uphill battle against this massive capital advantage. In other words, claims that demand for Nvidia's premium chips will collapse simply don't align with market realities and the trajectory of AI development.

Nvidia stock jumped in Europe on Wednesday, suggesting shares in the company at the heart of the artificial intelligence markets boom may recover further after a steep drop this week triggered by the rise of China's DeepSeek AI tool.

Despite the negative financial impact, Nvidia praised DeepSeek’s breakthrough. “DeepSeek is an excellent A.I. advancement and a perfect example of test time scaling,” a company spokesperson told Observer in a statement.

A new Chinese AI model threatens to diminish the need for Nvidia’s most-expensive chips, but some say the concerns are overblown.

Chinese startup DeepSeek has achieved what many (including experts) thought impossible: create a foundational, competitive AI model for just $5.6 million. By comparison, OpenAI’s unreleased GPT-5 (codenamed “Orion”) reportedly requires $500 million for six months of training.

Nvidia staged a moderate rebound on Tuesday, rising as much as 3%, following a 17% drop the prior day. More broadly, major US indexes rallied after the S&P 500 and Nasdaq 100 saw sharp losses on Monday amid concerns over the Chinese AI firm DeepSeek's rapid and seemingly cost-effective advances.