DeepSeek's AI Model Sparks Market Turmoil: Nvidia and Tech Stocks Plummet

Cramer is tempted to buy a chipmaker and sell a hyperscaler on the DeepSeek sell-off

Every weekday the CNBC Investing Club with Jim Cramer holds a "Morning Meeting" livestream at 10:20 a.m. ET. Here's a recap of Monday's key moments. 1. Stocks tanked Monday as Chinese startup DeepSeek's lower-cost AI model sent shockwaves through the tech sector. Semiconductor stocks led the decline with Nvidia and Broadcom both dropping 13%. Investors fear hyperscalers may be overspending on AI as DeepSeek appears to show you may be able to build competitive language models without using expensive chips. Jim Cramer said the latest news leaves more questions than answers. "I don't think we can necessarily make a conclusion about what to do." 2. Jim sees a potential opportunity in chip stock Broadcom. "If there had to be a buy, it would indeed be Broadcom ... it's bigger than just AI." He predicts this is the name the market could rally around instead of Nvidia because the company's portfolio also includes networking solutions and infrastructure software. We most recently trimmed our position on Dec. 17 after the stock went parabolic following its fourth-quarter earnings. Meanwhile, Meta is on our radar for a trim. With shares up 12% to start 2025 and up 65% over the past year, Jim warned that "it's up too high versus the rest of the Mag 7 stocks," adding that the tech giant could be spending too much on its AI buildout. Meta announced Friday it plans to increase AI-related spending to up to $65 billion this year. 3. Salesforce was bucking the sell-off with shares up 2.4%. Jim called the company a "beneficiary" of all the concern about DeepSeek. CEO Marc Benioff sees the value of AI in making the software, not the hardware. Apple is holding its ground, too, with its stock up 2.5%. The iPhone maker isn't investing billions of dollars in large language models, but is instead integrating the technology from other companies like OpenAI's ChatGPT into its devices. (Jim Cramer's Charitable Trust is long NVDA, AVGO, META, CRM. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

Jim Cramer's top 10 things to watch in the stock market Monday

Nvidia CEO Jensen Huang holds a Blackwell GeForce RTX 50 Series GPU (L) and a RTX 5000 laptop as he delivers a keynote address at the Consumer Electronics Show (CES) in Las Vegas, Nevada on January 6, 2025. 1. Artificial intelligence stocks are plunging as Wall Street grapples with the ascent of DeepSeek, a Chinese startup that possibly built a competitive AI model for much less money than the American tech giants are spending on their pursuits. Nasdaq futures are down almost 4%. The S&P 500 is sliding more than 2%. The Dow, holding up relatively better, is set to open 400 points lower. 2. Today is why we sell parabolic moves at the Investing Club, and why we have been going after the Bristol Myers Squibbs of the world and not constantly adding to Nvidia. We trimmed Club name Nvidia in early January, locking in a nearly 1,000% gain, and we also took profits in both Microsoft and Google parent Alphabet in December, lowering each stock's weighting in our portfolio, as I explained during last week's January Monthly Meeting. 3. There's data center panic thanks to DeepSeek's emergence, and all stocks in that popular trade are getting hit hard. Nvidia, the AI chip king, is down 11% in the premarket. Is Nvidia through? How about the providers of other data center technology, like electrical equipment supplier Eaton, which is tumbling almost 9%? How about the companies aggressively spending to build new data centers, such as Meta Platforms, which is down about 2.5%? 4. The answers to these questions are not fully clear yet, as I wrote in my Sunday column for Club subscribers. But if DeepSeek really built its model for so much less, then the Street's estimates for Nvidia's sales are now too high. The startup claims the open-source model was trained on older versions of Nvidia chips, which may reduce the value of its next-gen Blackwell AI platform or, at least, cause a pause in orders. That fear is why we're seeing Nvidia sell off so hard. 5. Citi maintained its buy rating on Nvidia. DeepSeek's achievement "could be groundbreaking," the analysts said, but they questioned the idea that the model could've been built without the use of advanced Nvidia chips. Analysts at Cantor Fitzgerald said they would be buyers on Nvidia's weakness, arguing DeepSeek is actually "very bullish" for the chipmaker because it can help make AI more ubiquitous. 6. DeepSeek passed OpenAI's ChatGPT as the No. 1 free app in Apple's App Store. I found it rather lacking in intelligence when I tried it, but it is a force in the marketplace. Did Meta CEO Mark Zuckerberg know about it last week when he announced the Club name planned to spend between $60 billion to $65 billion on CapEx this year? How about Oracle's Larry Ellison when he appeared at the White House announcing the massive Stargate Project for data centers? 7. Melius Research initiated coverage of Marvell Technology with a buy rating, saying it is the next chipmaker that can significantly grow thanks to its expanding custom AI chip business. I like Marvell, which has been on my watchlist for a while now, but this may not be the day to start buying. 8. Outside of AI, GE Aerospace landed a price target bump from Bank of America, which went to $225 a share from $200. Citi also went to $235 from $216. Both shops reiterated their buy ratings. BofA argued that 2025 will big a strong year for GE's commercial engine deliveries while its aftermarket services business is still doing well. 9. Stifel upped its price target on Starbucks to $114 from $110 and reiterated its buy rating ahead of earnings Tuesday night. Analysts downplayed any short-term concerns about tariffs and coffee prices, and instead said they expect to see signs of improving U.S. same-store sales in the coming months, which would be good for the Club stock. 10. Bank of America downgraded Air Products to a hold-equivalent neutral rating from buy in the wake of an activist-led board shakeup. CEO Seifi Ghasemi was not reelected to the board. We own Air Products rival Linde for the Club. Sign up for my Top 10 Morning Thoughts on the Market email newsletter for free (See here for a full list of the stocks at Jim Cramer's Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY, TOGETHER WITH OUR DISCLAIMER. NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

Here's what Jim Cramer tells investors to do with Nvidia as shares tumble on DeepSeek AI fears

Jim Cramer said Monday there's no need to panic and dump shares of Nvidia due to the emergence of Chinese AI startup DeepSeek. But he said it's also too soon to say whether the steep pullback is a buying opportunity. Right now, "I do not have the knowledge to be able" to say buy the dip in Nvidia, Jim said before Monday's opening bell. "Sometimes you have to admit ... I'm not sure what to do. It's not a cop out. I'm not sure what to do." Shares of artificial intelligence chip king Nvidia tumbled more than 11% in early trading, part of a broader sell-off in stocks linked to the AI trade, as investors grapple with the implications of DeepSeek's new AI model and chatbot. The tech-heavy Nasdaq Composite fell by roughly 3%. The S & P 500 lost about 1.7%. DeepSeek claims its model was trained on older versions of Nvidia's high-powered AI chips and the development cost just a fraction of what U.S. tech giants such as Meta Platforms have been spending on their own AI pursuits. While AI experts are generally impressed with DeepSeek's capabilities -- and its app shot up to No. 1 on Apple's App Store, supplanting OpenAI's ChatGPT -- some people are doubting the veracity of its claims. Analysts at Citigroup, for example, told clients that they "question the notion that its feats were done without the use of advanced GPUs" at some point in the development. Still, the heart of the matter is basically: If DeepSeek was able to make such a competitive, cost-efficient AI model, will companies need to spend as much on Nvidia's latest and greatest chips? Jim said as he tries to answer that question, he keeps coming back to the recent announcements by Meta CEO Zuckerberg and Oracle's Larry Ellison. Meta's planned capital expenditures for 2025 and Oracle's participation in a massive data-center expansion initiative showed the companies planned to continue spending billions on AI, with a significant share of that likely making its way into Nvidia's coffers. "When in doubt, do you go against Zuckerberg? Do you go against Ellison? I come back and say, I don't know. Sometimes it's better to say I don't know," Jim said. Jim and Director of Portfolio Analysis Jeff Marks will shine more light on DeepSeek and its potential implications for the rest of our stock portfolio at the Morning Meeting, which as usual starts at 10:20 a.m. ET. (Jim Cramer's Charitable Trust is long NVDA and META. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.