Nvidia (NASDAQ: NVDA) shares are experiencing another sharp sell-off in Wednesday’s trading. As of 1:26 p.m. ET, the stock was down 5.9%, while the S&P 500 index dipped 0.5% and the Nasdaq Composite fell 0.8%.

The decline comes amid growing concerns surrounding the recently released DeepSeek R1 artificial intelligence (AI) model. Investors are evaluating whether this new AI system signals weaker-than-expected demand for Nvidia’s advanced AI processors.

Unlike AI models from U.S. companies like OpenAI and Microsoft, DeepSeek R1 was reportedly developed with fewer and less powerful processors. It is also said to be significantly more efficient in terms of power consumption and cooling requirements. Despite these limitations, DeepSeek R1 is delivering performance that rivals or surpasses OpenAI’s latest ChatGPT model, which was previously considered the gold standard in generative AI.

Another factor weighing on Nvidia’s stock is the geopolitical tension between the U.S. and China. The AI sector has become a key battleground in their ongoing rivalry. According to Fox News, Senator Josh Hawley introduced a bill today to cut AI cooperation between the two nations and restrict U.S. investments in Chinese AI projects.

Is This a Buying Opportunity for Nvidia Stock?

DeepSeek R1’s emergence has rapidly shifted the narrative around Nvidia’s stock. While the new model may represent a major leap in AI efficiency, it remains unclear whether it will significantly reduce demand for Nvidia’s high-end graphics processing units (GPUs).

Moreover, some investors may find reasons to remain bullish on Nvidia, as details regarding DeepSeek R1’s development, training, and processing capabilities are still limited. With AI at the forefront of U.S.-China competition, some skepticism about the model’s reported efficiency is warranted.

Given ongoing large-scale investments in AI infrastructure by tech giants like Microsoft and Meta Platforms, high-performance GPUs are likely to remain essential for developing and running cutting-edge AI systems.