Arista Networks (ANET) is sinking 20% today after Chinese start-up DeepSeek reportedly unveiled AI models that were produced using old chips and much less computing power than the AI offerings of OpenAI and Meta (META). However, DeepSeek’s models are reportedly at least as proficient as those of OpenAI and Meta. ANET markets interconnect products to data centers.

Carol Gauthier/Shutterstock.com Why DeepSeek’s News Is Pulling Down ANET The Chinese tech firm reportedly used about 50,000 of Nvidia’s (NVDA) H100 chips, unveiled back in 2022, to launch its AI models. This news is leading to speculation that far fewer of Nvidia’s new chips will be utilized to create AI in the future. And since ANET’s offerings are utilized by data centers in conjunction with NVDA’s semiconductors to launch AI, the Street is now worried that there will be much less demand than previously thought for ANET’s products over the longer term. Investment Bank Warns of Negative Implications for Data Centers In a note to investors, investment bank Jefferies stated that DeepSeek’s ability to develop AI using old chips could put pressure on the tech giants to spend significantly less on AI going forward. Reduced AI expenditures by the latter firms, in turn, could negatively impact data centers’ financial results, Jefferies added. Because many data centers buy ANET’s products, the company could very well be significantly hurt if such a scenario unfolds. While we acknowledge the potential of ANET, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than ANET but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock . READ ALSO 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock Disclosure: The author owns shares of ANET but has no plans to trade them in the next 48 hours. This article is originally published at Insider Monkey.