U.S. tech stocks bounce back after a sharp drop triggered by the DeepSeek selloff, Reuters reports.
After a huge loss on Monday, U.S. technology stocks began to bounce back on Tuesday. Nvidia, the leader in AI chips, rose more than 6%, regaining some of the $593 billion it lost in one day due to a steep selloff. On Monday, the broader technology market suffered a heavy blow, with companies tied to AI losing over $1 trillion in value.
This dramatic drop was triggered by DeepSeek, a Chinese AI startup that released a low-cost AI assistant. DeepSeek's product claims to be much cheaper and more data-efficient than existing services. This new AI model raised concerns for American tech companies, though some remain skeptical of the company's cost estimates. Nvidia and other tech companies had been leading the AI boom, and DeepSeek's sudden entrance into the market made investors nervous.
Despite the initial panic, analysts expect a recovery. Cody Acree, a chip industry analyst, noted that the massive selloff on Monday was expected, given the sharp drop in stock prices. He added that the arrival of cheaper AI models might make investors rethink how much they are willing to pay for AI-related stocks. However, he believes there will still be demand for both cheaper and more advanced AI technologies.
Shares of major companies like Oracle and Marvell Technology also recovered on Tuesday after suffering big losses the day before. Oracle saw a 3.3% increase, and Marvell Technology's shares rose by 2.7%. On the other hand, the Philadelphia semiconductor index showed a slight decline of 0.2%.
While DeepSeek’s low-cost AI model has shaken things up, it has also spurred excitement in the industry. Sam Altman, CEO of OpenAI, the company behind ChatGPT, praised DeepSeek’s model but also emphasized that OpenAI plans to deliver even better models. U.S. President Donald Trump also acknowledged DeepSeek’s impact, calling it a "wake-up call" for U.S. industries.
This sudden change in market sentiment has caused investors around the world to reconsider their AI investments. From Tokyo to Silicon Valley, the effects of the selloff were felt. Some analysts, like Kim Forrest from Bokeh Capital Partners, expressed uncertainty over short-term returns but remained optimistic about the long-term future of AI.
In the wake of Monday’s steep losses, Nvidia’s shares were trading at just above $126, still below Friday's $142.62 close. Meanwhile, Apple and other tech giants helped boost the tech index on Tuesday. Apple, for example, rose more than 4%, significantly contributing to the overall market recovery. Many investors are now awaiting earnings reports from big players like Apple and Microsoft later this week, hoping for more clarity on their AI investments.
