Broadcom (AVGO) stock is bouncing between positive and negative territory Tuesday after the chipmaker plunged more than 17% Monday following the release of DeepSeek. The artificial intelligence (AI) chatbot from China quickly climbed to the top of Apple's (AAPL) app store as the most downloaded free application.
Wall Street is keeping a close eye on several semiconductor stocks after the release of DeepSeek, an open-source AI chatbot created by a Chinese technology company. DeepSeek claims that it can outperform OpenAI and Meta Platforms' (META) Llama 3.1, amongst others.
Furthermore, DeepSeek took only two months to build its generative AI models and cost less than $6 million, according to Reuters.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
"DeepSeek combined a number of techniques to improve compute efficiency in both training and inference," says UBS Global Research analyst Timothy Arcuri. He adds that while many of these techniques are already well known, the feedback from many leading experts in the AI sector, including Marc Andreessen and Noam Brown, "does suggest this was a significant achievement and a very powerful model (with another multi-modal model (Janus-Pro) released today and geared to images)."
Indeed, Andreessen, billionaire Silicon Valley investor and technology expert, posted on X (formerly Twitter) Sunday evening saying, "Deepseek R1 is AI's Sputnik moment."
Nvidia (NVDA), which lost $591 billion in market value on Monday, a record for any stock, also chimed in on DeepSeek's accomplishments.
"DeepSeek is an excellent AI advancement and a perfect example of Test Time Scaling," an Nvidia spokesperson told CNBC yesterday. "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."
Is Broadcom stock a buy, sell or hold?
Even with Monday's sharp drop, Broadcom shares are still up more than 100% on a year-over-year basis. And Wall Street remains overwhelmingly bullish on the tech stock.
According to S&P Global Market Intelligence, the average analyst target price for AVGO stock is $241.97, representing implied upside of nearly 20% to current levels. Additionally, the consensus recommendation is Strong Buy.
Financial services firm BofA Securities has a Buy rating and $250 price target on the large-cap stock.
"Data center continues to be one of the few bright spots into fourth-quarter semiconductor earnings, with four major U.S. hyperscalers (Google, Microsoft, Meta, Amazon) set to report in the coming weeks," wrote BofA Securities analyst Vivek Arya in a January 16 note. "Our top picks in AI remain NVDA and AVGO, respective leaders in merchant and custom AI silicon."
Meanwhile, Mark Malek, chief investment officer of Siebert, called yesterday's sell-off an overreaction. "Competition is what fuels technology innovation! DeepSeek developed an AI [model] in a short period of time with allegedly fewer resources than those used by the U.S.-based prototypes we have all been using to date."
He adds that this is "great news … for every AI behemoth out there who is probably already experimenting with similar models and will by now already be testing DeepSeek's method."
Related Content
-
Get Netflix, Hulu and Apple TV Plus for Free by Joining T-MobileT-Mobile customers save up to $35/month on streaming services thanks to this Netflix, Hulu and Apple TV Plus bundle. Here’s how to get it.
-
Missed Tax Day? Nearly One Million Taxpayers Still Can File and Claim Valuable Tax RefundsTax Refunds Some folks don’t file taxes simply because they don’t earn enough, but they could be missing out on a significant tax refund.
-
When Should You Hand Over the Keys — to Your Investments?The secret to retirement planning? "The best time to hand over the keys is before you’ve realized you need to hand over the keys."
-
Going to College? How to Navigate the Financial PlanningCollege decisions this year seem even more complex than usual, including determining whether a school is a 'financial fit.' Here's how to find your way.
-
Financial Steps After a Loved One's Alzheimer's DiagnosisIt's important to move fast on legal safeguards, estate planning and more while your loved one still has the capacity to make decisions.
-
How Soon Can You Walk Away After Selling Your Business?You may earn more money from the sale of your business if you stay to help with the transition to new management. The question is, do you need to?
-
Two Don'ts and Four Dos During Trump's Trade WarThe financial rules have changed now that tariffs have disrupted the markets and created economic uncertainty. What can you do? (And what shouldn't you do?)
-
I'm Single, With No Kids: Why Do I Need an Estate Plan?Unless you have a plan in place, guess who might be making all the decisions about your prized possessions, or even your health care: a court.
-
Most Investors Aren't as Diversified as They Think: Are You?You could be facing a surprisingly dangerous amount of concentration risk without realizing it. Fixing that problem starts with knowing exactly what you own.
-
My First $1 Million: Literacy Interventionist, 59, ColoradoEver wonder how someone who's made a million dollars or more did it? Kiplinger's new My First $1 Million series uncovers the answers.
