Technology stocks rebounded on Tuesday after suffering a massive selloff. Nvidia led the recovery, gaining 8.9% after losing nearly 17% on Monday. The AI chip leader had shed around $593 billion in market value, marking the biggest one-day loss for any company.
The market shock followed the release of DeepSeek, a Chinese AI model. The startup claimed its free AI assistant needed less data and cost far less than existing models. The announcement raised concerns about the dominance of U.S. AI companies, triggering a widespread selloff.
Investors Question DeepSeek’s Claims
Investors reacted cautiously on Tuesday. JJ Kinahan, president of tastytrade brokerage, said many were skeptical of DeepSeek’s cost efficiency. “People are asking for proof before making any big moves,” he said.
Tech Sector Sees Partial Recovery
The broader technology sector rose 3.6% on Tuesday after plunging 5.6% the day before. The Philadelphia semiconductor index also climbed 1.1% after a steep 9.2% decline on Monday.
Other Tech Giants Gain
Nvidia closed at $128.99, still below last Friday’s $142.62. Oracle gained 3.6% after a 13.8% drop on Monday. Marvell Technology recovered 3.5% after falling 19%. Broadcom rose 2.6% after Monday’s 17.4% decline.
AI Experts Weigh In
Point72 founder Steven Cohen viewed the DeepSeek development as positive. “It advances AI adoption,” he said. Meanwhile, OpenAI’s CEO Sam Altman called DeepSeek an “impressive model.” Former U.S. President Donald Trump said it was “a wake-up call” for American industries.
Nvidia’s Valuation Under Scrutiny
The selloff highlighted concerns about high AI stock valuations. Before Monday, Nvidia traded at nearly 60 times its earnings. The market average for S&P 500 companies is 22 times earnings. Nvidia’s valuation multiple fell to its lowest in a year, at 26.76, attracting retail investors.
Retail Investors Buy Nvidia Stock
Retail investors saw the dip as a buying opportunity. Vanda Research reported they bought a record net $562.2 million in Nvidia stock on Monday. J.P. Morgan data showed buy orders outnumbered sell orders by a 2:1 ratio.
Apple rose 3.7%, making it the Nasdaq’s second-biggest boost after Nvidia. Microsoft climbed 2.9%, reversing losses from the previous two sessions. Meta Platforms added 2.2%, extending its gains for the seventh straight day.
Apple, Microsoft, and other major tech companies are set to report earnings this week. Investors will be keen to hear about their AI investments and market strategies.
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