Investing.com -- Morgan Stanley lowered its price target for Nvidia (NASDAQ:NVDA) from $166 to $152 on Tuesday, citing investor concerns sparked by the release of DeepSeek’s AI model.
Analysts trimmed Nvidia’s valuation multiple from 35x to 32x amid broader questions about AI efficiency, export controls, and near-term demand.
DeepSeek, a Chinese AI company, recently unveiled an AI model developed on significantly lower-cost hardware, raising concerns about potential shifts in the AI investment landscape.
Morgan Stanley (NYSE:MS) noted that Nvidia acknowledged that "DeepSeek's work illustrates how new models can be created using that technique, leveraging widely-available models and compute that is fully export control compliant,” adding that the Chinese market remains a major revenue driver for Nvidia despite U.S. export restrictions.
While the efficiency innovations behind DeepSeek’s model were impressive, Morgan Stanley noted that they were “well-worn ground” and unlikely to significantly alter spending behavior in the AI sector.
Analysts emphasized that industry contacts have indicated, “This will not change our spending plans,” and “There’s nothing magical here.”
Morgan Stanley highlighted ongoing robust demand for Nvidia’s next-generation Blackwell products but acknowledged short-term headwinds.
Demand for Nvidia’s current Hopper GPUs has started to stall as customers await Blackwell’s release. Additionally, manufacturing yield concerns for the GB200 chip could temper near-term upside.
Despite reducing Nvidia’s price target, Morgan Stanley remains optimistic about the long-term outlook for AI semiconductors, citing strong underlying demand for Blackwell products.
Analysts concluded, “We expect to return to meaningful upside in 2H,” as Nvidia’s new products ramp up production and adoption.
Overall, Morgan Stanley sees Nvidia well-positioned for continued growth but advises caution amid short-term market volatility and investor sentiment following DeepSeek’s disruptive announcement.