How DeepSeek threatens Anant Raj, Netweb Technologies' AI ambitions

Even high-flying stocks have a way of coming down to earth. And for those in the artificial intelligence (AI) space, the landing is proving really really rough. Globally, Nvidia, the undisputed leader in AI chipsets, lost close to $600 billion in market cap on Monday, the biggest ever single-day drop for a company in US history. The catalyst? Chinese tech startup DeepSeek's AI models that are seen as potentially disruptive to the traditional AI computing landscape.

Nvidia's rout is having a ripple effect across world markets and Dalal Street is not untouched, especially companies like Netweb Technologies and Anant Raj, which until a few days ago were riding the AI euphoria, boasting gobsmacking one-year returns of 100 to 300 per cent! Both companies had tied their growth stories to AI and the booming demand for data centres, making them darlings of an exuberant market. But in just two days, both stocks have come crashing down with declines of up to 40 per cent, wiping out months of gains.

What's worrying investors

At the core of the selloff in India and overseas is DeepSeek's advanced AI models—much cheaper and almost as good as American rivals—which threaten to reduce demand for specialised and expensive AI computing hardware offered by the likes of Nvidia and other manufacturers.

For instance, DeepSeek-V3, touted as the most affordable large language model, reportedly cost just $5.6 million compared to OpenAI's $100 million-GPT-4. Not just that, DeepSeek's models are more efficient, requiring less computational power and fewer specialised chipsets.

The market, it seems, is pricing in the possibility that AI investments may not cost as much as previously thought. Naturally, the massive investments poured in by US tech giants are now getting called into question. Market observers also believe some of the tech titans may even be looking at cutting down their planned AI spending.

How DeepSeek could be a threat to Indian AI companies

• Netweb Technologies
  Netweb's business model is manufacturing and integrating high-performance computing hardware for data centres. Its status as a tier-1 partner of Nvidia enabled it to benefit from the AI boom, as demand for GPUs and related hardware soared. The company's 20 years of expertise also enabled partnerships with Nvidia, Intel, and AMD, and its solutions power data centres handling AI workloads across industries.
  
  The potential threat: However, DeepSeek's efficient models are seen reducing the reliance on GPU-heavy systems like those built by Nvidia and integrated by Netweb. Simply put, if DeepSeek's cost-effective architecture gains traction, the demand for Netweb's hardware offerings could soften.
  
  Compounding the problem, Netweb lacks exclusivity in its partnerships with Nvidia and others, leaving it vulnerable to competition from both global giants like Dell and domestic players like Esconet Technologies.
  
  Valuation was another sore point. At a P/E of over 150 times, Netweb's stock had been priced for perfection. The market's recent re-evaluation reflects not just the DeepSeek threat but also the premium investors had been paying for its lofty growth prospects.
  
  Exposure to AI solutions: The company makes 86 per cent of revenue from high performance computing, private cloud, and AI workstations.
  
• Anant Raj
  Anant Raj, a real estate company with grand ambitions in the data centre space, is similarly exposed. Its plan to build 4 million square feet of data centre capacity in Delhi-NCR, projecting Rs 3,300 crore in revenue over five years, was a key driver of its stock's rally. The company is in partnerships with Google and RailTel to bring technical expertise to its projects and claims it could construct data centres at half the industry cost.
  
  The potential threat: However, with DeepSeek potentially enabling businesses to scale AI capabilities without heavy capital investments, investors are pricing in a shift from on-premises data centres to cloud-based systems, possibly curtailing the demand for physical data centre infrastructure—such as the 307 MW capacity Anant Raj is building.
  
  Even without DeepSeek's disruption, competition from larger players like Adani and Reliance, who are building gigawatt-scale facilities, puts pressure on its ability to capture market share.
  
  The risks are magnified by Anant Raj's lack of experience in a technically demanding sector and its high valuations. The market, in re-pricing the company, may be accounting for both external and internal vulnerabilities.
  
  Exposure to data centres: In Q2 FY25, the company's data center operations contributed a meagre Rs 8 crore to its total EBITDA of Rs 113 crore.

Remember

The sharp selloff in Netweb and Anant Raj highlights the fragility of businesses tied to AI and data centres, where disruption is constant and valuations are unforgiving. While it's too early to gauge the full impact of DeepSeek's solutions on the broader AI landscape, the market's reaction highlights the risks of relying on ambitious growth stories in fast-changing industries.

Hot valuations driven by market euphoria can magnify the downside when uncertainties emerge. While Netweb and Anant Raj hold potential, their exposure to competitive risks and technological disruption makes it essential to evaluate their fundamentals closely and keep expectations grounded.

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