NVIDIA Potentially Targeted by Short Sellers Amid DeepSeek Selloff, According to Investment Manager

This article does not constitute investment advice. The author holds no stake in any of the stocks referenced.

Potential Impact of DeepSeek on NVIDIA’s Stock Valuation

Recent commentary from Navellier & Associates suggests that NVIDIA’s stock may have fallen prey to short selling amid the turmoil surrounding the DeepSeek selloff last month. In a recent podcast, Louis Navellier, the firm’s Chief Investment Officer, along with MAPsignals’ founder Jason Bodner, discussed how underperformance from DeepSeek has potentially influenced the narrative used by short sellers targeting NVIDIA.

Understanding the DeepSeek Fallout

During the podcast, Navellier addressed inquiries about DeepSeek’s struggles, recognizing that the application’s performance fell short of expectations. He noted that the announcement of DeepSeek coincided with the highly watched NFC AFC football playoffs, contributing to the negative trading activity in the premarket. He emphasized that “the average trader’s watching those football games” during such pivotal events, which may have heightened market volatility.

The Cost of Development: A Question of $500 Million

The narrative that DeepSeek could rival established players like OpenAI and ChatGPT—but at a reduced cost—has now come under scrutiny. Navellier highlighted that claims of cheap operational costs might have been overblown given the recent selloff. He pointed out technical issues that caused “constant crashes”in cloud operations, indicating a failure in the anticipated performance that fueled short-selling strategies.

Expert Insights on Chinese Market Dynamics

Bodner reinforced Navellier’s points while introducing a critical perspective on news from China. He remarked, “I also love a good conspiracy every now and then, ” but cautioned that any news emerging from China, especially regarding technologies and investments, should be viewed with skepticism. The founder of DeepSeek, Liang Wenfeng, reportedly oversees a hedge fund with $8 billion in assets, which adds a layer of complexity to the claims surrounding DeepSeek’s technology.

Reevaluating DeepSeek’s Training Budget

Reports claimed that DeepSeek had only spent $5.6 million on operational modeling, but Bodner contested this, suggesting the actual training expenses might be as high as $500 million—far exceeding those of OpenAI. His insights underline the inconsistencies in the DeepSeek narrative and how they might have played a role in the recent market fluctuations.

The Implications of Market Manipulation

As short-selling is prohibited in China, Bodner raised a possibility that the selloff could be attributed to a coordinated public relations maneuver by Chinese state entities, optimized for an illiquid trading environment. He posited that these factors collectively led to significant market cap adjustments for NVIDIA and other AI stocks, which he interpreted as indicative of organized short-selling activity during a critical time.

Conclusion: Analyzing the Future for NVIDIA and AI Stocks

Both Navellier and Bodner’s observations underline the volatility and intricate dynamics at play in the AI sector, particularly as they relate to emerging technologies from China. Their insights prompt a reevaluation of the market strategies and investor sentiment shaping the future of key players like NVIDIA amidst continuing turbulence.

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