Many U.S. tech stocks are grossly overvalued, with some chipmakers valued more highly than more mature and well-rounded shares of the U.S. Magnificent Seven, such as Apple (AAPL.US)      and Meta (META.US)      , said Jim Reid, a strategist at Deutsche Bank, in a report to clients.

Nvidia traded at about 56 times past 12-month earnings on Monday, and AMD (AMD.US)      traded at a triple-digit PE. The emergence of China's DeepSeek model of AI prompts investors rethinking the outlook for chip stocks and questioning the sky-high valuations they are willing to pay, the strategist said.

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The rise of DeepSeek AI suggests that the rapid growth in demand for semiconductors may be slowing down, Reid said. The AI industry is still in its infancy, and investing in such stocks depends on a company's potential to drive future productivity. It's almost impossible to know how it will develop or what competition the current industry leaders will face.
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