DeepSeek Ban in South Korea Triggers AI Security Concerns; Morgan Stanley Still Bullish on NVIDIA
The fast-rising Chinese AI startup DeepSeek faced a temporary ban in South Korea. This highlights the struggle within the emerging field of Artificial Intelligence. Rapid innovation and increasing security anxieties are at play. This situation underlines growing global caution towards AI technologies. Simultaneously, financial analysts project continued strength for key industry players such as NVIDIA.
Security Concerns Trigger Ban and Wider Warnings
South Korea's government move to temporarily disable DeepSeek's services within its borders was not isolated. It indicated a general concern regarding the risks of advanced AI. Data privacy and national security are key worries. Ironically, this concern was not limited to DeepSeek. South Korean officials issued warnings to other AI chatbots, including ChatGPT. These warnings advised against using such chatbots on devices handling sensitive information.
According to Reuters, the South Korean government issued an official notice on Tuesday. It called on all ministries and agencies to use AI services from both DeepSeek and ChatGPT with heightened caution in work-related settings. This followed proactive steps by key South Korean establishments. Korea Hydro & Nuclear Power, for example, banned DeepSeek earlier in the month due to security concerns.
- Ministry of Defense: Blocked DeepSeek on computers marked for military use to avoid possible security breaches.
- Foreign Ministry: Restricted employee access to DeepSeek on computers connected with external networks.
Government warnings occurred, but confirmation of a formal ban of DeepSeek's services has not been made yet within South Korea. The situation underlines growing international scrutiny of AI platforms. Australia and Taiwan reportedly banned DeepSeek from government devices this week. DeepSeek's app was also removed from Apple and Google app stores in Italy. This removal was due to questions about compliance with the General Data Protection Regulation and practices on user privacy.
DeepSeek's Data Handling Under Scrutiny
South Korea's information privacy authority is reportedly preparing to contact DeepSeek directly. The authority intends to probe the company about its handling of users' personal information. The inquiry's result is vital for DeepSeek's future in the country. The current ban's future depends on DeepSeek's response and the authorities' assessment. The ban may be lifted, allowing DeepSeek to resume operation. Alternatively, the ban may be extended indefinitely, shutting DeepSeek out of the South Korean market.
Morgan Stanley's View: NVIDIA Stands Tall Despite AI Competition
Growing concerns about AI security and the rise of new, efficient models, like DeepSeek's R1, are impacting financial analysis. Analysts are watching the implications for larger AI chip market players, particularly NVIDIA. DeepSeek emerged with a very efficient LLM. Yet, Morgan Stanley remains bullish on NVIDIA.
Morgan Stanley considered the recent sell-off of NVIDIA's stock, partly due to competitive pressure from DeepSeek, a "buying opportunity." The investment firm acknowledges DeepSeek introduces "long-term uncertainties" and "some challenges" to NVIDIA. However, they believe these challenges are surmountable. Their confidence stems from continued strong demand for NVIDIA's chips, Hopper and Blackwell, in the near term. Morgan Stanley forecasts renewed confidence in NVIDIA's growth trajectory starting in the second half of 2025. This is driven by increased focus on AI inference and enthusiasm for ASIC-related events.
Furthermore, despite DeepSeek's emergence, large hyperscalers like Microsoft, Google, Meta, and Tesla are set to maintain high capital spending in 2025. This implies ongoing demand for high-performance AI infrastructure, benefiting NVIDIA.
Citi also offers a positive near-term outlook for NVIDIA. They anticipate significant revenue growth in upcoming quarters driven by the ramp-up of Blackwell production. Citi notes NVIDIA's stock currently trades at a P/E well below its ASIC peers after recent corrections. This presents an attractive valuation. Although Citi slightly reduced its price target on NVIDIA shares due to chip restrictions to China, they maintain an overall 'buy' rating.
Disclaimer: The article combines reporting on security bans and financial analysis. It is solely for information and not investment advice. Consult financial professionals before making investment decisions. The AI landscape and market are constantly changing.
