Why AMD Stock Is Sinking Today

AMD (NASDAQ: AMD) shares are experiencing a significant drop in Monday's trading session. As of 3:45 p.m. ET, the stock is down by 7%, reflecting broader market trends with the S&P 500 declining by 1.8% and the Nasdaq Composite down by 3.5%.

The decline in AMD’s stock can be attributed to investors reacting to recent developments involving DeepSeek, a start-up based in China. DeepSeek has launched an artificial intelligence (AI) model that reportedly outperforms OpenAI’s ChatGPT in certain areas. This news has put pressure on AMD's stock as the market considers the implications for U.S. companies in the competitive AI landscape.

AMD Stock Falls on DeepSeek AI Concerns

Wall Street is focused on DeepSeek's new AI technology, causing a wave of sell-offs due to fears about the U.S.'s competitive edge against China in AI development. DeepSeek's new software was developed rapidly, taking less than two months and costing only $5.6 million to train. In contrast, the training of OpenAI's ChatGPT-4 is estimated to be over $100 million.

Furthermore, the DeepSeek-R1 model reportedly requires much less processing power, cooling, and other resources while still achieving results that are competitive with ChatGPT and other U.S.-developed AI models. This raises important questions about the growth potential for companies like AMD and Nvidia, especially since DeepSeek-R1 was developed using Nvidia's A100 processors, which, although powerful, are not the newest offerings from the company.

What Comes Next for AMD?

On top of the concerns regarding DeepSeek, AMD stock is also reacting to broader economic factors. Recent reports suggest that the Federal Reserve may keep interest rates steady while assessing the economic impact of recent policies. A change in this strategy could mean the Fed might not implement the expected two rate cuts this year, which could further challenge the outlook for AMD and other growth stocks.

With the recent downturn, AMD’s share price has only risen 3.5% over the last three years and is now approximately 46% below its peak value. This has raised caution among analysts regarding the company’s future growth in the AI sector. Factors like the DeepSeek competition and fluctuations in the demand for advanced processors could contribute to continued stock volatility.

For investors who are optimistic about AMD's long-term growth, this downturn might present a buying opportunity, although it is essential to be mindful of the speculative nature of such investments.

AMD, stock, AI