DeepSeek set off AI hardware ‘arms race’—and Nvidia (NVDA), Intel (INTC), and AMD stocks are poised to cash in

As artificial intelligence models become increasingly advanced and competition heats up, so does the demand for computing power.

During a CNBC interview on Wednesday, Nvidia’s CEO Jensen Huang offered a glimpse into just how fast AI is advancing, particularly as programs become better at performing tasks akin to human reasoning.

That comes at an unfathomable cost, according to Huang. “The amount of computation necessary to do that reasoning process is 100 times more than what we used to do,” he said.

Although chipmakers like Nvidia have been roiling following the DeepSeek launch, many analysts think it’s actually worked in their favor because the news urged companies to invest more in AI hardware.

Is the AI boom just starting?

AI has been a particularly volatile sector, filled with a slew of variables that even savvy tech investors struggle to analyze with any real precision.

But even before Nvidia’s fourth-quarter financials were released, Deepwater Asset Management’s Gene Munster pointed to AI data center expansion plans that promise enough demand for Nvidia for at least the next two years.

Munster believes that China’s DeepSeek platform was a catalyst for increased investments among AI data centers, and Nvidia is positioned well to cash in on that growth.

“Going into DeepSeek, just before it came out, the hyperscalers were expected to increase their [capital expenditure] spend by 20% in calendar ‘25,” he said.

“Now it’s expected to be just above 40%. That’s a meaningful move higher, and so I think that really is important, and I think the substance of that … is that the AI hardware trade will last longer than most investors expect.”

If Munster is right, the new wave of AI investment could launch AI hardware stocks like Nvidia, Intel, and AMD into an upswing.

Ritholtz Wealth Management CEO Joshua Brown also predicted that DeepSeek’s rollout will accelerate the global demand for AI applications and processing power. He went on to downplay the rhetoric of some asset managers who “absolutely loathe” the so-called Magnificent 7, a group of tech stocks that includes Nvidia.

“These stocks, Nvidia in particular, have been making them look bad for 24 straight months, and they’re dying for this moment where small caps are up, Europe is flat, value stocks are outperforming growth,” he said.

“They view this as comeuppance for the people who have been riding these giant tech stocks to huge gains. I think because there’s that desire to see these investors get beaten up a little bit, maybe that’s why some of the rhetoric about this being the end of Nvidia is getting so overdone.”

Nvidia CEO: DeepSeek is "fantastic"

Nvidia’s CEO’s bold prediction accompanied strong earnings numbers, which nevertheless ushered in a sell-off on Thursday that saw shares close down by nearly 8.5%.

However, analysts like Munster are bullish on the company and the sector in the longer term.

“I understand the apprehension about the funk that the AI trade is in right now, but if what the hyperscalers are saying is true, companies like Nvidia should have more upside throughout this year than investors are currently anticipating,” he concluded.

For his part, Huang also took the opportunity to praise DeepSeek despite facing harsh restrictions on his own company’s business in China. “DeepSeek was fantastic,” he said.

“It was fantastic because it open-sourced a reasoning model that’s absolutely world-class.”

Nvidia shares tumbled dramatically last month amid worries about cheaper alternatives from China. If current trends hold up, though, there will be enough pent-up demand to go around—at least for a while.