Amidst chaos Citi maintains NVDA PT at 175. Respect. Questions deepseeks claims about not using high power GPUs
Recently, DeepSeek’s R1, a China-made LLM prompted investor inquiries around cost of compute as it announced to use just a fraction of its US competitors’ cost and still achieved top performance. While DeepSeek’s achievement could be groundbreaking, we question the notion that its feats were done without the use of advanced GPUs to fine tune it and/or build the underlying LLMs the final model is based on through the Distillation technique. While the dominance of the US companies on the most advanced AI models could be potentially challenged, that said, we estimate that in an inevitably more restrictive environment, US’ access to more advanced chips is an advantage. Thus, we don’t expect leading AI companies would move away from more advanced GPUs which provide more attractive $/TFLOPs at scale. We see the recent AI capex announcements like Stargate as a nod to the need for advanced chips. Maintain Buy."