Investors Eye AI Stocks After DeepSeek’s R1 Model Shakeup

In late January, the artificial intelligence (AI) investing scene was jolted by the introduction of DeepSeek’s R1 model. This model, trained at a significantly lower cost than its U.S. rivals while achieving comparable performance in certain areas, created a wave of anxiety among some AI stocks. However, several of these stocks have managed to bounce back.

Despite the disruptions, the AI investment landscape still offers appealing options. The impact of DeepSeek should not be considered a major roadblock but rather a potential catalyst for growth. Here are three companies worth considering this February.

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1. Nvidia (NASDAQ: NVDA)

Nvidia faced significant downturns following the DeepSeek news, as investors believed that AI companies would require fewer high-powered graphics processing units (GPUs). However, this may be a misconception. DeepSeek had to rely on Nvidia H800 GPUs due to U.S. export constraints, which compelled it to adopt greater efficiency.

Nevertheless, U.S. AI firms prioritize powerful models that depend heavily on Nvidia’s GPUs. This trend remains unchanged, turning Nvidia’s stock dip into a noteworthy buying opportunity. Projections for Nvidia’s 2026 fiscal year include a remarkable 52% revenue growth. As of now, the stock is available at just 27 times its forward earnings, suggesting it remains a reasonably priced option in the tech sector. It might be wise for investors to consider this opportunity before Nvidia releases its fourth-quarter FY 2025 results later this month.

2. Meta Platforms (NASDAQ: META)

Meta Platforms also witnessed a sell-off post-DeepSeek announcement, but quickly rebounded as a result of exceptionally strong Q4 performances. As the parent company of major social networks like Facebook, Instagram, WhatsApp, Threads, and Messenger, Meta generates nearly all its income from advertising. In Q4, advertising revenue surged by 21%, significantly lifting Meta’s profits, with earnings per share (EPS) climbing by 50% due to a mere 5% increase in expenses.

Moreover, Meta is heavily investing in AI, planning to allocate between $60 billion and $65 billion on capital expenditures in 2025 mainly for AI projects. This commitment suggests that the company is focused on developing powerful AI models rather than merely efficient ones.

CEO Mark Zuckerberg has predicted the possibility of developing an AI engineer with mid-level coding and problem-solving skills by 2025. Such an achievement could significantly enhance Meta’s innovation rate, solidifying its position as a leader in AI.

With many developments on the horizon, although the stock is near record highs, confident investors might see further gains as breakthroughs unfold throughout 2025.

3. ASML (NASDAQ: ASML)

ASML may not be as widely recognized as Meta or Nvidia, yet its contribution to the AI landscape is crucial. The company manufactures extreme ultraviolet lithography machines essential for creating high-end chips, holding a monopoly on this technology. The advanced chips necessary for supporting AI models could not exist without ASML’s machines.

ASML’s strict export controls have affected its business in China, leading to a stock decline last October when it lowered its FY 2025 revenue forecast from 30 billion to 40 billion euros down to 30 billion to 35 billion euros. However, this still reflects a healthy 15% revenue growth at the midpoint for a company of its size.

In Q4, ASML achieved net bookings surpassing 7 billion euros, significantly higher than the 2.63 billion euros from the previous quarter and also above Wall Street’s expectations of 3.99 billion euros. This indicates a bright growth outlook for ASML and alleviates concerns regarding its performance.

Interestingly, ASML’s CEO Christophe Fouquet remarked that low-cost AI models could actually benefit the chip business by expanding their market. As AI becomes more accessible, the demand for computing hardware is expected to rise, signifying a positive outlook for all chip manufacturers. Given ASML’s critical role, it appears to be a smart investment this February.

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Randi Zuckerberg, former director of market development and spokeswoman for Facebook, and sister to Meta Platforms CEO Mark Zuckerberg, serves on The Motley Fool’s board of directors. Keithen Drury holds positions in ASML and Nvidia. The Motley Fool has positions in and recommends ASML, Meta Platforms, and Nvidia. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.