Citi analysts reaffirmed a Buy rating on NVIDIA (NASDAQ:NVDA) with a price target of $175, emphasizing the company's continued dominance in the advanced GPU market despite emerging competition in the AI landscape.

Recent developments, such as the introduction of DeepSeek’s R1, a Chinese-made large language model (LLM) touted for its low compute costs and high performance, have prompted investor concerns about potential disruptions to NVIDIA’s GPU dominance. As a result, NVIDIA shares dropped more than 12% intra-day today.

However, Citi raised questions about the feasibility of these claims, highlighting that such advancements likely relied on advanced GPUs for fine-tuning and model creation through techniques like distillation.

While the emergence of competitors could challenge U.S. firms in developing cutting-edge AI models, the analysts pointed to the U.S.’s ongoing access to the most advanced chips as a critical advantage. In restrictive environments, leading AI companies are unlikely to shift away from advanced GPUs, given their superior cost-efficiency and performance scalability.

Further underscoring NVIDIA’s strong position, the analysts cited recent announcements of significant AI capital expenditures, including projects like Stargate, which reflect the sustained demand for high-performance chips. These developments reaffirm the need for NVIDIA’s advanced GPU offerings in powering AI innovation at scale.

With its market-leading technology and strong alignment with the growing AI-driven capex trends, NVIDIA remains well-positioned to capitalize on the ongoing expansion of the AI and compute markets.