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In November 2022, Open released ChatGPT, which demonstrated how conceptual can revolutionize our understandings of what machine learning can accomplish. Last month, the Taiwanese business DeepSeek released its latest design, R1, and shook up the world of the blenders.
R1 has, apparently, outperformed the best AI models on the American picture– but what makes this development absolutely essential is how. DeepSeek claims that the AI’s coaching cost, which includes the cost of the background technology and equipment that makes it possible, is only$ 6 million. The R1 unit is open source. That’s a small fraction of the costs associated with some of the headline-grabbing US-based AI methods, such as ChatGPT, Gemini, or Grok.
But is this a sign of a tectonic shift in AI advancement, or simply a one-off anomaly? Tristan Gerra, a consultant for Bloomberg, leans toward the latter, suggesting that this might be more of a turning point than the start of a pattern.
” DeepSeek is high in novelty statements, but time will tell if it causes a change in the way that existing AI models and AI structures are structured – we firmly believe it does not.” Due to the fact that DeepSeek is based on existing AI studies and GPU architectures, the claimed value seems impossible. Also, we see lower-end/lower cost implementations as fueling further need for AI systems, with price elasticity driving a comparable surge in Graphic volumes”, Gerra opined.
With that in mind, Gerra is doubling down on Nvidia ( NASDAQ: NVDA ) and Micron ( NASDAQ: MU) as top AI plays. Both companies are market leaders, both enjoy’ Powerful Get ‘ analyst consensus ratings, and both stand to benefit from AI’s continuous growth. Let’s take a closer appearance.
Nvidia
Second up on our listing, Nvidia, isn’t just the nation’s largest silicon company– it is one of the largest publicly traded companies on Wall Street. The chip maker’s stock lost a historic$ 590 billion in the aftermath of the DeepSeek headlines, the biggest single-day decline ever recorded.
However, Nvidia’s meteoric rise has been well-documented and even accounting for the new DeepSeek-related lost, the property has gained 441 % over the past three years. Nvidia’s Device cards have proven to be the most well-known among data center operators and developers of AI applications, leading to the sales increase.
R1’s launch was a strong concern to that supremacy. According to DeepSeek, their latest AI unit doesn’t use the latest versions of the top-end computer chips or rely as much on high-speed technology. In consequence, it merely meets a small portion of the energy demands found in well-known Orion. If R1 lives up to this enthusiasm, it would become the first of a new model of AI, and Nvidia, which has based its success on dominating the market for cheap, high-end, AI-capable computer chips, may be forced to adapt quickly. That undoubtedly spooked investors.
Nvidia, for its part, seems to be taking this development in foot. The company released a statement praising DeepSeek for its amazing development in AI systems, particularly in demonstrating the woman’s test-time scaling features. Additionally, the company pointed out that DeepSeek’s R1 is also based on earlier AI versions and those that employed more conventional AI teaching techniques.
In the event that Nvidia is right, the market for high-end AI-capable chips will continue to exist, and Nvidia still leads that marketplace despite delays to the fresh Blackwell series. And next summer, Nvidia unveiled the successor to the Blackwell line, Rubin, a new GPU infrastructure scheduled for release in 2026.
In its last set of financial results, covering fiscal 3Q25, Nvidia reported$ 35.08 billion in revenues, up 93 % year-over-year and beating the forecast by$ 1.95 billion. At the bottom range, Nvidia’s non-GAAP EPS of 81 percent was 6 cents per share better than expected. The company had deep pockets to deal with a storm and finished the fiscal third quarter with$ 38.5 billion in cash and additional liquid assets.
The key here for Tristan Gerra is that Nvidia continues to be a reliable person with a robust product range. The 5-star scientist says in his write-up on Nvidia,” We are significantly lowering our 2H gross margin forecast for Nvidia given our expectation of a lower blend of GB200 versus B200/B300 this year based on system-level issues. This mix shift could result in a reduction in our AI revenue estimate for the year by 1M to 1.5M units, taking account of implementation challenges. No changes to our EPS estimates: Beyond an expected B200 channel push, we expect strong B300 demand, while the Rubin platform should catalyze further performance/revenue growth. NVDA remains a Best Idea”.
As a’ Best Idea,’ Nvidia shares get an Outperform ( i. e., Buy ) rating from Gerra, whose$ 195 price target on the stock implies a 49 % increase from current levels over the next year. ( To watch Gerra’s track record, )
Overall, Nvidia shares hold a Strong Buy rating from the Street’s analyst consensus, based on 39 recent reviews that include 37 to Buy and 3 to Hold. The shares are currently trading for$ 131.14 and have a target price of$ 178.86, which indicates a 50 % upside potential for the next year. ( See )
Micron Technology
Next on our list is Micron, a semiconductor chip firm based out of Boise, Idaho. The company is renowned for its memory chips, which are essential parts of the AI boom. Micron’s high-bandwidth memory ( HBM ) chips are especially suited to AI uses.
In February of last year, Micron announced that it was partnering with Nvidia, providing its HBM3e chips for the larger firm to use in its AI-capable semiconductors. More recently, Micron’s HBM4 was chosen for use in Nvidia’s upcoming Rubin platform. In a competitive environment, Micron boasts that its HBM chips can match or exceed the performance of its rivals while using 30 % less power, giving them a competitive advantage.
Like Nvidia above, Micron took a hard hit with the release of DeepSeek’s R1. Micron, like most of its peers, has benefited greatly from the rise in AI over the past few years. But, by stepping up and providing the powerful memory chips required by AI data centers and high-speed computing, the company is vulnerable to DeepSeek’s release of a lower-cost, less energy-hungry AI competitor. The chips consume less power but keep their performance: the chief qualities that will be needed to compete with DeepSeek’s model.
Like Nvidia above, Micron comes to this fight with a record of successes. In recent quarters, the company’s earnings and revenues have both been trending upward. In the last reported period, fiscal 1Q25, Micron’s$ 8.71 billion in revenue was up 84 % year-over-year and met Street expectations, while the non-GAAP EPS of$ 1.79 beat the forecast by 2 cents. At the end of the first quarter of the fiscal year, Micron had$ 6.7 billion in cash and cash equivalents.
Checking in again with Baird analyst Gerra, we find him upbeat on Micron– citing the company’s exposure to Nvidia’s Rubin as a key point. Gerra says of Micron,” We are bullish on the ramp of Rubin, which by extension will be very positive for HBM content. A 30 % + increase in HBM capacity is required to support flat volume due to the larger die size and I/O count of Rubin. This dynamic is in support of continued tight HBM supply in 2026 and will benefit pricing/margin, in our view. Beginning in 2H25, Micron has a strong position as a major HBM supplier, while Samsung struggles to keep up. A positive effect of DDR5 is lower Grace volumes. Micron remains a Best Idea”.
Looking ahead, the analyst gives MU shares an Outperform ( i. e., Buy ) rating, with a price target of$ 130 that points toward an upside of 42 % for the next 12 months.
23 recent reviews, which break down the Strong Buy and 2 Hold consensus ratings for Micron, were used to calculate the Strong Buy consensus rating. The shares are priced at$ 91.68, and their$ 136.1 average price target, which suggests a 48 % increase for one year, is slightly higher than the Baird view. ( See )
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is only intended for informational purposes. Before investing, it is very important to conduct your own analysis.