The global AI industry was thrown into turmoil in January 2024 when DeepSeek, a Chinese artificial intelligence company backed by hedge fund High-Flyer, released R1, a powerful open-source reasoning model.

What made R1 revolutionary was not just its capabilities, but the fact that it had been developed using significantly weaker chips and a fraction of the funding used by Western AI firms like OpenAI, Anthropic, and Google DeepMind.

DeepSeek’s unexpected success sent ripples across the tech industry, raising questions about whether the AI boom—fueled by the belief that bigger, more expensive computing power leads to smarter AI—was about to be disrupted by a more cost-effective approach.

Global investors reacted swiftly and dumped shares of AI chipmakers, particularly Nvidia, whose market dominance has been built on the assumption that more powerful hardware is essential for AI progress.

The result? Nvidia’s market capitalization plunged by $600 billion, the worst single wipeout in its history, and CEO Jensen Huang’s personal fortune took a nearly 20% hit.

But according to Huang, this was a massive overreaction based on a flawed understanding of how AI models work.

Huang: “Investors Took Away the Wrong Message”

During a pre-recorded interview aired as part of an event by Nvidia partner DDN to introduce its new Infinia software platform, Huang pushed back against investor fears, arguing that the market misinterpreted what DeepSeek’s achievement actually meant for AI’s future.

“From an investor perspective, there was a mental model that the world was pre-training and then inference. And inference was: you ask an AI a question, and you instantly got an answer,” Huang said. “I don’t know whose fault it is, but obviously that paradigm is wrong.”

In other words, investors wrongly assumed that AI’s reliance on high-powered computing had been fundamentally disrupted—but according to Huang, that couldn’t be further from the truth.

He explained that while DeepSeek’s R1 demonstrated that pre-training can be done with fewer resources, it does not mean AI models can function at scale without advanced computing infrastructure.

Instead, the real challenge in AI development today lies in post-training methods, which allow AI systems to refine their intelligence, improve their reasoning, and make more accurate predictions after their initial training phase.

“Pre-training is still important, but post-training is the most important part of intelligence. This is where you learn to solve problems,” Huang emphasized.

Post-training techniques—such as reinforcement learning, fine-tuning, retrieval-augmented generation (RAG), and self-improvement algorithms—are what truly make AI models more reliable, intelligent, and efficient over time.

And unlike pre-training, post-training requires even more computational power, meaning that the demand for high-performance AI chips, like those produced by Nvidia, will only continue to grow.

“Post-training methods are really quite intense,” Huang noted. “The demand for computing power will continue to grow as AI models improve their reasoning abilities.”

Why DeepSeek’s Breakthrough Isn’t a Threat to Nvidia

Rather than seeing DeepSeek R1 as a threat to Nvidia’s dominance, Huang insisted that its success was actually a positive development for the AI industry.

“It is so incredibly exciting. The energy around the world as a result of R1 becoming open-sourced — incredible,” he said.

His stance echoed that of Lisa Su, CEO of Nvidia’s biggest rival AMD, who recently addressed similar concerns by stating: “DeepSeek is driving innovation that’s good for AI adoption.”

Huang’s comments come amid an ongoing debate in the AI world about whether AI scaling—the process of improving models by using more data and computing power—is slowing down.

In late 2023, reports emerged that OpenAI’s latest advancements were hitting a plateau, leading to speculation that the AI boom might not deliver on its promise. That, in turn, raised fears that Nvidia’s AI-fueled revenue explosion could lose momentum.

But Huang has consistently pushed back against this narrative, arguing that the focus of AI scaling has simply shifted from training to inference and post-training.

“Scaling is alive and well; it has just moved beyond training,” Huang said in a previous speech.

He indicated that by focusing on post-training intelligence, improved reasoning, and self-learning models, the AI industry will continue to require powerful chips, ensuring that Nvidia’s hardware remains essential to AI progress.

What This Means for Nvidia’s Upcoming Earnings Report

Huang’s remarks come just days ahead of Nvidia’s first earnings call of 2025, scheduled for February 26.

DeepSeek’s impact has already been a major discussion point on earnings calls across the tech sector, with companies from Airbnb to Palantir addressing its implications.

With Nvidia’s dominance in AI hardware facing renewed scrutiny, Huang’s comments denote that the company will double down on post-training as a core pillar of its long-term AI strategy.

The market has already begun to correct itself, with Nvidia’s stock recovering much of its lost value.

However, the biggest test will come on February 26, when Nvidia’s earnings report will reveal whether investor fears were truly unfounded—or if the AI industry’s computing revolution is entering a new phase that Nvidia must adapt to.

The Nigerian government has officially admitted that food prices and essential commodities may never revert to pre-subsidy removal levels, despite ongoing economic reforms aimed at stabilizing the economy.

This admission was made by Sunday Dare, Special Adviser to President Bola Tinubu on Media and Public Communication, in a statement issued on Thursday.

“Yes, prices are not back to the pre-subsidy removal regime. They probably may never be. But prices of foodstuffs and other services are dropping across the board. Multiple independent market surveys have confirmed this development,” Dare stated.

Dare pointed to the latest inflation report by the National Bureau of Statistics (NBS), which claims that inflation fell from 34.8% to 24.48% following a rebasing of the Consumer Price Index (CPI).

The rebased CPI, which updates the price reference period to 2024 and the weight reference period to 2023, has been defended by the government as a necessary step to improve economic data accuracy.

According to the revised NBS report, food inflation stands at 26.08%, core inflation at 22.59%, urban inflation at 26.09%, and rural inflation at 22.15%. Dare described the rebasing as a globally accepted practice, arguing that it provides a more precise picture of the economy.

“Rebasing injects precision into policymaking by providing a panoramic view of a country’s economic terrain, exposing both its strong and weak sectors. Vital information to guide investors is also provided,” he said.

However, it is believed that the government’s inflation figures misrepresent actual market conditions.

Dare’s statement reflects a shift in government rhetoric—from promising that reforms would lead to significant economic rebirth resulting in an affordable cost of living, to now acknowledging that previous prices are gone for good. It also confirms what many Nigerians have long feared, that the economic shocks triggered by the fuel subsidy removal in May 2023 have left lasting damage, and there is little hope of a full reversal of the cost-of-living crisis.

Since taking office, Tinubu’s administration has implemented bold but painful economic reforms, including fuel subsidy removal, exchange rate unification, interest rate hikes, and tight monetary policies to curb inflation.

The government argued that the policies were necessary to free up funds for infrastructure and social programs. However, the immediate effect was a nationwide economic crisis, as transportation costs skyrocketed, making movement and logistics more expensive. The cost of goods and services surged, particularly food prices, while household incomes were eroded, leaving millions unable to afford basic necessities.

Even after months of government interventions, market realities have remained grim.

Has the Government Run Out of Options?

The admission that prices may never return to their previous levels has been interpreted by many as an admission that the government has exhausted its policy options to steer the economy out of its current turmoil.

Interest rate hikes have been implemented multiple times by the Monetary Policy Committee (MPC) to curb inflation, yet prices remain high.

However, the Tinubu administration highlighted progress in the oil sector as evidence of economic recovery.

According to Dare, Nigeria’s crude oil production has exceeded 1.75 million barrels per day, reducing the need for petroleum imports and alleviating pressure on foreign exchange reserves.

Additionally, the government cited a recent Bloomberg Africa report, which suggested that Nigeria’s economic outlook is improving and that the country could soon regain its status as Africa’s largest economy once the rebased Gross Domestic Product (GDP) figures are released next month.

“Under President Tinubu’s watch, we are seeing the headwinds abating and a new economic tailwind in favor of economic reforms,” Dare asserted.

The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has opted to retain the Monetary Policy Rate (MPR) at 27.5%, despite widespread expectations that it would cut interest rates following a significant drop in Nigeria’s inflation rate.

CBN Governor Olayemi Cardoso announced the decision on Thursday at a press conference in Abuja, following the committee’s 299th meeting. The decision to maintain the current rate comes after months of aggressive monetary tightening by the CBN, which has raised the MPR 15 times since May 2022 in a bid to combat surging inflation.

However, with the National Bureau of Statistics (NBS) reporting a sharp drop in inflation from 34.8% to 24.48% in January due to a rebasing of the Consumer Price Index (CPI), many analysts expected the MPC to ease monetary policy. The committee’s decision to hold the rate has cast further doubt on the credibility of the NBS’ inflation recalibration, which many argued misrepresents Nigeria’s economic reality.

The NBS’ revision of Nigeria’s CPI methodology significantly altered inflation calculations. The new methodology adjusted the weight of various components in the consumer basket to better reflect current spending patterns, leading to a drastic decline in reported inflation.

Cardoso acknowledged the revised CPI calculations but noted that committee members were still concerned about persistent inflationary pressures, particularly in food prices.

“Members, however, were not oblivious to the risk of persisting inflationary pressures driven largely by food prices,” Cardoso stated.

The controversy surrounding the NBS figures has been fueled by widespread complaints from Nigerians, who lament that prices of essential goods and services remain alarmingly high despite the reported drop in inflation. Many economic observers believe that the CPI rebasing does not reflect actual market conditions, and the MPC’s refusal to lower interest rates is believed to have reinforced doubts over the accuracy of the NBS’ inflation report.

Foreign Exchange Stability and Fiscal-Monetary Coordination

Beyond inflation, the CBN also factored in foreign exchange market stability in its decision to hold rates. Cardoso highlighted that the appreciation of the naira and the gradual convergence of exchange rates between the official and parallel markets were key factors in the committee’s deliberations.

“The committee highlighted the benefits of the improvements in the external sector to exchange rate stability, including the convergence of rates between the Nigeria foreign exchange market and the bureau de change,” he said.

This comes as the CBN continues to implement measures aimed at boosting liquidity in the FX market, with policies designed to tighten control over currency speculation and improve dollar inflows.

Additionally, the MPC stressed the importance of fiscal-monetary coordination, calling for stronger collaboration between the CBN and the federal government to achieve price stability and sustained economic growth. With Nigeria facing external shocks, volatile oil revenues, and a decline in foreign investment, such coordination is seen as crucial for long-term economic stability.

Other Key Policy Decisions: CRR and Liquidity Ratio Maintained

In addition to holding the MPR at 27.5%, the committee also kept the Cash Reserve Ratio (CRR) at 50% and the liquidity ratio at 30%. These measures aim to ensure stability in the banking system while controlling inflationary pressures.

Furthermore, the CBN reiterated its commitment to deepening financial inclusion, managing inflation expectations, and improving the monetary policy transmission mechanism.

“The committee also urged the bank (CBN) not to relent in its efforts to boost market liquidity,” Cardoso stated.

Is the NBS’ Inflation Report Credible?

With the MPC deciding to hold rates despite the inflation decline, the question remains: Does the NBS’ rebasing truly reflect Nigeria’s economic reality?

Public perception suggests otherwise as rising food and energy costs remain high, contradicting the official inflation figures. Against this backdrop, the business community remains skeptical, with concerns that the revised CPI paints an overly optimistic picture of Nigeria’s inflationary environment.

Analysts believe that investors may take caution as conflicting signals from the CBN and NBS raise questions about policy transparency and data reliability.