US technology stocks rebounded on Tuesday after Monday’s massive selloff triggered by China’s DeepSeek AI model, which raised concerns over the dominance of US firms.
Nvidia, which lost nearly $593 billion in market value on Monday, surged 8.9 percent as bargain hunters stepped in. The broader tech sector gained 3.6 percent after a 5.6 percent plunge, while the Philadelphia semiconductor index rose 1.1 percent following its steepest drop since March 2020.
DeepSeek’s free AI assistant, touted as a low-cost alternative requiring less data, sent shockwaves across the industry, but skepticism remains over its claims. “Investors are now asking for proof that DeepSeek is really as cost-effective as it claims,” said JJ Kinahan of tastytrade brokerage.
Nvidia closed at $128.99 on Tuesday, still below Friday’s $142.62.
Other major stocks recovered some losses, with Oracle rising 3.6 percent after Monday’s 13.8 percent drop and Marvell Technology gaining 3.5 percent after a 19 percent decline. Broadcom also rose 2.6 percent after a steep fall.
Point72 founder Steven Cohen saw the DeepSeek development as positive, arguing it accelerates AI advancements. Despite Monday’s rout, bullish options trading in Nvidia persisted, and retail investors bought a record $562.2 million in its stock.
AI-related stocks remain highly valued, with Nvidia’s price-to-earnings ratio previously at 60—far above the S&P 500’s 22. However, the drop in valuation to its lowest in a year attracted investors. Analysts suggest that cheaper AI models won’t replace the need for high-performance chips but may reshape the industry’s landscape.
US AI leaders acknowledged DeepSeek’s capabilities while questioning its impact. OpenAI CEO Sam Altman praised it but reaffirmed that superior models would emerge. Former President Donald Trump called it “a wake-up call” for US industries.
European chip stocks also suffered, with ASML dropping nearly 1 percent after Monday’s 6 percent loss. Meanwhile, Apple, Microsoft, and Meta contributed to Tuesday’s tech rebound. Apple gained 3.7 percent, Microsoft rose 2.9 percent, and Meta extended its winning streak to seven days.
With major tech earnings reports due this week, investors will focus on AI investments and market competition, keeping volatility high in the sector.
Source: Reuters
Bd-pratidin English/Fariha Nowshin Chinika
