After the DeepSeek Shockwave: ‘An Opportunity in Israeli Chip Stocks’

The semiconductor sector faced turbulence after Chinese startup DeepSeek unveiled its AI model, which seemingly reduces the need for massive AI infrastructure investments. While major chip stocks tumbled—some recovering partially—Oppenheimer sees a buying opportunity, including in Israeli chipmakers

At the start of the week, Chinese AI startup DeepSeek sent shockwaves through the markets by launching an AI model that allegedly requires just 1/7 of the computing power used by its Western counterparts while delivering comparable or even superior performance. This raised concerns among investors that Big Tech’s massive AI infrastructure spending—which has fueled semiconductor giants like Nvidia—might be unjustified, potentially curbing future investments. The reaction was swift, with Nvidia stock plummeting 17% in a single session.


Despite the market panic, Oppenheimer analysts remain unfazed. They argue that even if DeepSeek's model proves more efficient, it doesn’t necessarily mean that AI investments will dry up. Instead, they see the recent selloff as a buying opportunity, particularly for Israeli chip stocks like Nova, Camtek, and Tower Semiconductor.


"Oppenheimer: "The Market Overreacted—Israeli Chip Stocks Could Benefit


"Tech stocks on Wall Street saw aggressive selloffs following the launch of DeepSeek’s AI model, which claims to deliver competitive performance at significantly lower costs," Oppenheimer analysts wrote. "Fears of increased competition and a slowdown in AI spending led to sharp declines across AI-focused semiconductor stocks such as NVIDIA Corp. , Broadcom 9.77%  , and Marvell Technology Group Ltd. 0.39%  . This wave of selling also hit Israeli semiconductor stocks, including Nova Measuring Instruments Ltd. , Camtek Ltd. -1.84%  , and Tower Semiconductor 4.77%  ."


DeepSeek introduced two open-source AI models, V3 and R1, which reportedly cut AI training costs by 95% compared to leading models like ChatGPT, Gemini, Claude, Llama, and Grok. While verifying these claims is difficult, Oppenheimer analysts believe that DeepSeek likely relied on less advanced AI chips, which are not subject to U.S. export restrictions, and optimized computing efficiency using task splitting, memory utilization, and streamlined model architectures. The tradeoff? Lower precision in AI responses—but at a fraction of the cost. This sparked concerns that AI infrastructure spending—long seen as a growth engine for chipmakers—could slow down, triggering the sharp market reaction.


However, Oppenheimer sees a different angle. "Even if these fears are justified, lower AI processing costs could actually accelerate demand for AI-powered devices, ultimately driving semiconductor growth. The global chip market has faced prolonged weakness for two years, with AI semiconductors standing out as a rare bright spot. Expanding AI adoption could fuel overall semiconductor demand, benefiting not only chipmakers but also chip equipment suppliers."


They add that long-term AI investment plans by cloud giants and semiconductor manufacturers (led by TSMC) are unlikely to be derailed by short-term market volatility. "We view the selloff in Israeli chip stocks as a compelling opportunity and expect strong earnings reports to drive a sentiment shift, leading to a stock price recovery."


Oppenheimer Upgrades Nova, Reaffirms Bullish Calls on Tower and Camtek

"We believe the sharp declines reflect an overreaction based on overly pessimistic expectations for AI infrastructure investments," Oppenheimer stated. "Alongside our U.S. semiconductor research team, we see DeepSeek’s AI efficiency as a potential catalyst for AI chip investments rather than a headwind. Lower AI model costs could expand demand for AI-capable devices, revitalizing the entire semiconductor industry, which has struggled outside the AI data center space."


The analysts emphasize that market selloffs driven by panic often create long-term buying opportunities. "We maintain our Outperform ratings on Tower Semiconductor and Camtek, with price targets of $60 and $100, respectively, reflecting upside potential of roughly 20% from current levels. Additionally, we are upgrading Nova from Perform to Outperform, with a price target of $250—an 8% upside from its latest closing price."

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Israel Consumer Price Index (CPI) in January rose by 0.6%, hitting the upper end of economists' forecasts

With inflation still high, a budget that remains loose and far from approval, and rising inflation in the U.S. that could spill over into the local market, the chances of an early interest rate cut are fading. While most economists still anticipate a rate cut in the second quarter, the immediate prospects for monetary easing are diminishing.

Eitan Gerstenfeld |

Housing prices continued to rise, with November-December data showing a 0.4% increase, reflecting an annual surge of nearly 8% in 2024. The Consumer Price Index for January was calculated using an updated methodology, incorporating a new weighting system and a revised base period (2024 average = 100 points). Over the past twelve months (January 2025 vs. January 2024), the CPI increased by 3.8%.


Significant price increases were recorded in fresh fruit (up 2.5%), miscellaneous expenses (up 3.3%), home maintenance (up 2.1%), food (up 1.0%), and rent (up 0.4%). Conversely, clothing and footwear saw a notable drop of 4.2%, fresh vegetables declined by 2.0%, and housing services for owner-occupiers fell by 0.7%.


Rent prices showed a 2.6% increase for tenants renewing contracts, while new tenants (in units where there was a tenant turnover) saw a 3.3% rise.


Construction Input Index Surges by 2.6% in One Month—A Statistical Distortion?

The Construction Input Price Index for residential buildings rose by 2.6% in January 2025, reaching 137.1 points compared to 133.6 points the previous month. This sharp increase includes both price changes occurring in January and an adjustment for wage costs in the construction sector, covering the period from October 2023 to December 2024. Essentially, for an extended period, labor costs were not properly accounted for in the index, despite contractors' repeated complaints—this time, justifiably so. As a result, these costs were suddenly reflected in the January index, creating a data distortion that misrepresents the real cost trends in the construction sector.


Excluding labor costs, the Construction Input Price Index still rose by 1.0%. Over the past year, it has increased by 5.3%, largely driven by a 9.2% rise in labor costs and a 3.2% increase in equipment and vehicle rentals. The price index for materials and products climbed by 1.3% in January, with sharp increases in ready-mix concrete (up 5.2%), mortar (up 4.0%), wall and floor tiles (up 1.8%), and marble (up 1.1%). On the other hand, prices for glass (-5.5%), construction iron (-2.3%), and iron mesh (-1.3%) declined. The wage index for construction workers jumped by 4.5% in January 2025.


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