The crash is absolutely rational; the cascading effect highlights the missing moat for companies like OpenAI. Without a moat, no investor will provide these companies with the billions that fueled most of the demand. This demand was essential for NVIDIA to squeeze such companies with incredible profit margins.
NVIDIA was overvalued before, and this correction is entirely justified. The larger impact of DeepSeek is more challenging to grasp. While companies like Google and Meta could benefit in the long term from this development, they still overpaid for an excessive number of GPUs. The rise in their stock prices was assumed to be driven by the moat they were expected to develop themselves.
I was always skeptical of those valuations. LLM inference was highly likely to become commoditized in the future anyway.
NVIDIA was overvalued before, and this correction is entirely justified. The larger impact of DeepSeek is more challenging to grasp. While companies like Google and Meta could benefit in the long term from this development, they still overpaid for an excessive number of GPUs. The rise in their stock prices was assumed to be driven by the moat they were expected to develop themselves.
I was always skeptical of those valuations. LLM inference was highly likely to become commoditized in the future anyway.