Monday's steep sell-off in NVIDIA Corporation (NASDAQ:NVDA) saw its stock plummet by 17%, marking the largest single-day decline for the company since March 2020. The drop came after Chinese AI startup DeepSeek introduced a new, cost-effective AI model, prompting fears that Nvidia's dominance in the AI sector could be challenged. However, Tom Lee, head of research at Fundstrat Global Advisors, told CNBC that this decline might be an overreaction and could present a buying opportunity for long-term investors.

DeepSeek's Challenge to AI Giants

DeepSeek's introduction of a low-cost, open-source AI model has raised concerns about the future demand for high-powered chips like those manufactured by Nvidia and Broadcom Inc (NASDAQ:AVGO). DeepSeek's model, which operates at a fraction of the cost of traditional AI systems, has intensified fears that rivals could soon develop competitive solutions without relying on expensive computing power.

Despite the intense pressure on semiconductor stocks, including Nvidia, Lee believes that the 17% drop in Nvidia's stock was excessive. He compared the situation to the past struggles between Betamax and VHS, suggesting that while the current downturn may be alarming, it is unlikely to spell long-term trouble for Nvidia's position as a leader in AI.

Buying Opportunity for Long-Term Investors

Lee emphasized that declines of this magnitude often turn into huge opportunities for investors. In the past, similar drops in tech stocks have provided lucrative entry points for those looking to invest in companies with strong long-term growth potential. With Nvidia still a leader in the AI sector, especially with its advanced computing chips, Lee sees the current situation as an overreaction fueled by the sudden rise of DeepSeek's AI model.

For those who are considering long-term investments in AI infrastructure and semiconductor stocks, understanding the Advanced DCF model can provide valuable insights into the future cash flows of companies like Nvidia. This can help investors assess whether current market movements represent a temporary dip or a broader trend.

AI Race Between China and the U.S.

The sell-off in Nvidia also highlights the ongoing AI race between China and the United States. While China's progress in AI technology has raised concerns about the future dynamics of the market, Lee remains optimistic about Nvidia's long-term prospects. He cautioned, however, that it is still too early to determine whether the recent slump in Nvidia's stock is the beginning of a larger trend.

Investors keeping an eye on the global tech race and the role of advanced computing chips in powering future AI solutions should consider utilizing the Ratios (TTM) API to analyze key financial ratios of tech companies, including Nvidia, in real-time. This data can provide valuable insights into the company's current financial health and its ability to weather challenges from rising competition.