NVIDIA (NVDA) Stock Forecast: DeepSeek Building Its Own Chip - Is $197 the Bottom?

Reuters’ news that DeepSeek is quietly creating its own AI chip to lessen reliance on Nvidia is the latest in a string of news about domestic silicon that will act as a recurring barrier for NVDA throughout 2026. Chinese AI developers cut off from Nvidia’s newest chips by US export limitations have three major responses: they can use older generations of NVDA hardware still available to export; they can turn to Chinese domestic AI chips from companies like Huawei’s Ascend; or they can develop custom chips for specific use cases like DeepSeek seems to be doing. 

All of these options reduce the potential market share for Nvidia’s best-selling GPU products in China, but NVDA data centre revenue in China has already fallen from $4.6 billion a year to practically $0 in light of the new export restrictions. Even if DeepSeek’s AI chip announcement is symbolically significant, it is a marginal negative that is affecting revenue Nvidia has already virtually lost.

Jim Cramer, who commented earlier this week that “everyone hates Nvidia” but “everything still revolves around Nvidia,” nails the current market sentiment contradiction. Nvidia is the worst-performing share of the chip group on a year-to-date basis, underperforming AMD’s more than 100% gain, and the semiconductor ETF’s 59% return, and yet everyone buying the stock is building hyperscalers, data centres, or AI infrastructure businesses. 

On a technical note, according to Motley Fool’s nine Nvidia 15% or more drops from 2023, these dips generated an average 851% return for shareholders over five years. This historical trend is not a guarantee, but it’s the background in which long-term investors see the current 17% pullback from NVDA’s all-time high of $236.54.

Nscale’s $900 million credit facility closing, in order to speed up the building of AI data centres across Europe and the US on Nvidia infrastructure, is the most readily accessible piece of proof that demand for Nvidia’s goods is still alive and well, and growing outside China. Nscale is Nvidia backed; in other words, Nvidia owns a piece of a company that is now borrowing $900 million to buy Nvidia products and build data centres on Nvidia hardware. 

That logic is the same as in the Nscale partnership: third parties are borrowing and deploying money against Nvidia compute, because the other option, of waiting on Nvidia to develop and sell data centre space, is unsatisfactory for clients who need space today.

On the 4H chart, NVDA at $196.94 is challenging a support-taken-resistance area at $198 to $204 in a series of green candles that are absorbing the down selling; this represents the first green absorption of that range in a six-week period in the downtrend channel. RSI at 51.40 is neutral. An above the $203.40 level will signal the long and will target $221.10.

NVIDIA (NVDA) Stock Price Chart - Source: Tradingview

The stop level is the close below $190.10, however a failure of that level could signal another leg down in price towards $184.75 to $180.31.

• Entry: Long above $203.40, support-taken-resistance level broken
• Target: $221.10, channel resistance is broken
• Stop: Close below $190.10, support levels broken
• DeepSeek: Reuters, developing own AI chip to reduce reliance on Nvidia. Shares down -2% in premarket.
• Nscale: $900M credit line to develop AI data centres on Nvidia platform in Europe and the US.
• 61 analysts: 61 analysts rate stock a strong buy; $301.62 average target (53% upside)

Reuters reported July 7-8 that China-based DeepSeek, maker of some of the best-performing efficient large language models, is developing its own chip to break free from the need for Nvidia. The story was part of a pattern of Chinese tech companies pivoting to homegrown chips after the U.S. has limited China's access to Nvidia due to export restrictions and supply constraints. Shares fell from 1.5% to 2% at premarket open. This story is likely to have a limited impact given the extent to which Nvidia’s China data centre revenue has already dropped from $4.6 billion a year earlier to essentially zero because of ongoing restrictions. Deepseek would only impact a segment of Nvidia’s total business where that company has seen limited exposure for a long while.

We had previously noted that at this price level, a short could play off of any break below $198.30 with a target of $184.70. The setup has flipped long above $203.40 with a $221.10 target for two reasons. First, buyers absorbed the selling pressure in the $197-$204 range where resistance and support had overlapped, meaning that the $184.75 channel target would no longer be within easy reach. In addition, the Chaikin Money Flow indicator has improved off of June 25's low and sits near the neutral level of -0.01 at the current level. Both are evidence that the downmove seen recently has stopped. To remain long, NVDA needs to close higher than $203.40, which would represent the first time the stock has done so above that level after closing lower on June 23.

Nvidia entered trading in 2026 as one of the most highly valued companies in the large-cap category, in large part due to expectations of high growth. Now trading around 21.7X forward earnings, the current value of Nvidia is much closer to the average value seen in the S&P 500, even as the consensus expects continued earnings expansion going into 2027.

The average price target set by analysts at $301.62 is well above the current trading level at $196.94, and so there is a perception of room to grow for the company's next chapter in many analyst circles. By contrast, competitors like AMD and Micron started the year at significantly lower valuations, and thus had more space to appreciate over the coming months. Nvidia's 5% gain is the result of the compression seen on the multiple, while the business itself has been stable.

Nvidia has a new headline risk as reports come out of DeepSeek developing their own custom chip at the $196.94 level, following the Chinese effort to reduce reliance on Nvidia. Given the current restrictions, the impact of this is expected to be limited. Nvidia's China data centre revenue had already fallen from $4.6 billion a year earlier to near zero. Meanwhile, Europe-based data centre developer Nscale raised $900 million with a credit facility, indicating a continued demand for AI infrastructure in Europe and the U.S. 

Finally, NVDA's technical picture is long again for the first time since a six-week cycle. We are targeting $221.10 on a close over $203.40 and using a stop loss just under $190.10. 61 analysts continue to sit at an average of $301.62, which suggests ~53% gain is possible. Money flow is on the improvement side, and the global demand for infrastructure to support AI is still going strong.