Netweb Technologies Faces Market Pressure Amid AI Disruption
Stock Decline Linked to Global Selloff in AI Stocks
Shares of Netweb Technologies fell sharply by 13% on Monday, closing at Rs 1,605 on the Bombay Stock Exchange (BSE). This decline reflects a broader global selloff impacting artificial intelligence (AI)-based technology stocks.
DeepSeek Challenges Market Norms
The selloff was exacerbated by the rising prominence of DeepSeek, a Chinese startup disrupting the AI landscape with its affordable solutions. DeepSeek’s innovations challenge prevailing market assumptions about AI profitability and the demand for high-performance chips.
Netweb’s Position in the AI Ecosystem
Netweb Technologies generates approximately 15% of its operating revenue from its AI segment. The company has established itself as a key player within the AI ecosystem through an OEM partnership with the U.S. chipmaker NVIDIA.
A Strategic Partnership with NVIDIA
This partnership focuses on developing advanced GPU systems utilizing NVIDIA’s Blackwell GB200 platform. This collaboration is central to Netweb’s growth strategy in the AI sector.
Significant Revenue Growth from AI
“AI has emerged as a key growth driver, contributing to around 14.7% of the company’s operating revenue in the nine-month period of financial year ’25, reflecting a year-on-year growth of 136.3%,” stated Sanjay Lodha, chairman and managing director of Netweb Technologies, during a recent investor call.
Investor Confidence on the Decline
The disruption caused by DeepSeek has significantly affected investor confidence across various markets. The Hangzhou-based startup recently introduced an AI assistant that promises competitive performance to established chatbots while requiring less costly hardware.
Lower-Cost Innovations Cast Doubt on AI Hardware Needs
DeepSeek’s approach raises questions about the assumption that advancements in AI necessitate complicated and expensive hardware, a main revenue source for companies like Netweb.
Global Market Reactions
The implications of these developments were felt globally. The pan-European STOXX 600 index dropped by 0.7% on Monday, heavily influenced by declines in technology stocks.
U.S. Markets Exhibit Discomfort
Futures for the U.S. Nasdaq Composite sank by 3.1%. Major companies like Nvidia, Tesla, and Meta all experienced declines in early European trading, with Nvidia’s stocks trading in Frankfurt down nearly 7%.
Netweb’s Vulnerability to Market Shifts
Netweb’s strong association with Nvidia places it in a precarious position as shifts occur within the AI hardware sector. As a manufacturing partner for Nvidia’s advanced platforms, Netweb has thrived during the sector’s expansion.
The Threat of Low-Cost Competitors
However, the rise of low-cost entrants like DeepSeek poses a significant threat to this growth narrative, creating uncertainty for Netweb’s future prospects.
The Genesis of DeepSeek
Founded in 2023 by Liang Wenfeng, DeepSeek has quickly gained traction with its open-source AI models and a popular mobile application. This rise prompts discussions on how the global tech ecosystem will adapt to these cost-effective, energy-efficient solutions.
Market Strategies Moving Forward
To navigate these challenges, companies like Netweb will need to reassess their strategies, balancing innovation with cost-effectiveness to maintain their competitive edge in the evolving landscape of AI technology.
Industry Experts Weigh In
Experts have noted that continued attention to advancements in competitive technology, such as those presented by DeepSeek, will be crucial for established firms looking to sustain their market positions.
Conclusion: The Future of AI and Market Dynamics
The rapidly changing dynamics in the AI sector emphasize the importance of adaptability. As new entrants reshape the market, established players must innovate to remain relevant and profitable.
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(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of Economic Times.)
Questions and Answers
- What caused the decline in Netweb Technologies’ stock price?
The drop was primarily due to a global selloff in AI stocks, triggered by the emergence of DeepSeek, a Chinese startup offering low-cost AI solutions.
- What percentage of Netweb’s revenue comes from AI?
Approximately 15% of Netweb Technologies’ operating revenue is derived from its AI segment.
- What partnership is critical to Netweb’s growth strategy?
Netweb has a significant OEM partnership with NVIDIA, focusing on the development of advanced GPU systems.
- How has DeepSeek impacted investor confidence?
DeepSeek’s disruptive technology has shaken investor confidence by introducing lower-cost alternatives in the AI market, thus challenging established assumptions about hardware requirements.
- What are the prospects for companies like Netweb Technologies in this evolving market?
Companies like Netweb will need to adapt their strategies to address the challenges posed by low-cost competitors while continuing to innovate and meet market demands.
