02:51 PM EST, 01/29/2025 (MT Newswires) -- Chinese startup DeepSeek's artificial intelligence chatbot is not revolutionary enough to upend the western artificial intelligence industry as the total addressable market for AI compute is still expected to double in the long term, BofA Securities said Wednesday.

The brokerage expects AI compute TAM to top $500 billion by 2028 and 2029, or roughly double its 2025 estimate. BofA Securities reiterated buy ratings on Nvidia ( NVDA ) , Broadcom ( AVGO ) and Marvell Technology ( MRVL ) and called this week's selloff "an enhanced buy opportunity."

"DeepSeek's contributions are noteworthy but part of the rapidly evolving generative AI industry rather than a big course correction in our view," BofA analyst Vivek Arya said in a research note.

While DeepSeek touted that its current large language model was built in two months at a cost of less than $6 million, Arya said these optimizations "are not proprietary, are readily available to others, and bend the cost-curve in certain kinds of derivative training."

Western AI capital expenditures are expected to be largely driven by a move towards artificial general intelligence, or AGI, as well as enterprise use cases and, over time, edge AI, a wider net compared with DeepSeek's current capabilities, according to BofA Securities.

"We believe the emergence of China's DeepSeek model could spur even higher AI spend from US hyperscalers," he said. A "near-term arbiter" will be how large cloud and enterprise customers talk about CapEx spending on their upcoming earnings calls, which Arya said he expects will be "supportive of our TAM forecasts."

Since the software DeepSeek used for its optimization is open source, hardware and chips remain important in the advancement of AI models, according to the note. "We believe those who have the capability to deploy both advanced software and advanced hardware -- US hyperscalers -- are likely to deploy both in their race to AGI," Arya said.

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