2 Artificial Intelligence (AI) Stocks to Watch in the Wake of DeepSeek's Breakthrough

Core Insights - A small Chinese AI start-up has developed a generative AI chatbot to compete with OpenAI's ChatGPT, claiming to have trained its model with only $6 million and a few thousand Nvidia GPUs, contrasting sharply with U.S. tech companies that spend billions on similar projects [1] - The announcement from the start-up has raised concerns about the future spending of tech giants on GPUs and servers, leading to a sell-off of Nvidia's stock [4] Group 1: Nvidia's Market Position - Despite initial concerns regarding Nvidia's future, major companies like Amazon and Alphabet have reaffirmed their substantial capital expenditure budgets, which will largely be allocated to data center infrastructure including Nvidia GPUs [2] - Nvidia's fiscal 2025 is already showing strong performance, with expectations for continued success [3] - The forward price-to-earnings ratio for Nvidia has decreased to 31, down from a recent peak of 50, indicating a potential buying opportunity for investors [4][5] Group 2: Dell's Business Performance - Dell's Infrastructure Services Group (ISG) reported a 34% increase in revenue year-over-year, reaching $11.4 billion, with operating income rising 41% to $1.5 billion, indicating strong demand for data center products [7] - A potential $5 billion deal with xAI could further boost Dell's ISG revenue [2][6] - Dell's Client Services Group (CSG) experienced a slight decline in sales by 1% to $12.1 billion, but still managed to achieve an operating profit of $700 million [7] Group 3: Investment Opportunities - Dell offers a rising dividend currently yielding 1.5%, with a recent 20% increase and a commitment to a 10% annual increase through fiscal 2028 [8] - Following the DeepSeek news, Dell's stock has also dropped, trading over 20% below the average analyst target of $150 per share, suggesting a potential buying opportunity for investors [10]