The rise of a Chinese AI startup sent shockwaves through the tech world.
US equity markets rebounded Tuesday, recovering from a tech-driven sell-off triggered by concerns surrounding Chinese artificial intelligence startup DeepSeek.
The S&P 500 closed up 0.92% at 6,067.70, led by technology sector gains.
The Technology Select Sector SPDR Fund (XLK) advanced over 2%, following a 4.9% decline Monday.
The Nasdaq Composite surged 2.03% to 19,733.59 after a 3.1% drop the previous session.
The Dow Jones Industrial Average added 136.77 points, or 0.31%, reaching 44,850.35.
Nvidia saw its stock fluctuate throughout the day, ultimately closing near its daily high with a gain of nearly 9%. This followed a significant 17% drop on Monday, representing a loss of almost $600 billion in market value.
Other tech companies, including Broadcom and Oracle, also saw gains, recovering from Monday’s losses.
The emergence of DeepSeek, which recently unveiled a low-cost, open-source large language model, has raised concerns about the scale of investment in AI by major tech companies. DeepSeek's model, reportedly developed for under $6 million, has challenged the prevailing view of AI development costs. Its open-source nature and reported low-cost chip requirements have fueled speculation about the future of AI development.
While Nvidia's positive performance on Tuesday provided some reassurance to investors, some analysts remain cautious.
Thomas Martin of Globalt Investments suggested that uncertainty persists as the market evaluates the implications of DeepSeek's technology. He acknowledged the ongoing demand for computing power and data centers but noted that market confidence has been affected.
Looking ahead, investors are focused on corporate earnings reports from several major tech companies, including Meta Platforms, Microsoft, Tesla, and Apple.
The Federal Reserve's upcoming decision on interest rates is also a key event. Market expectations are that the central bank will maintain current rates, with attention focused on any indications from Fed Chairman Jerome Powell regarding future rate adjustments.
Other market developments include fluctuations in energy stocks related to AI data center demand, the potential risks of leveraged single-stock ETFs as illustrated by Nvidia's volatility, and analysts' perspectives on the long-term viability of the "Magnificent Seven" tech stocks.
Price target adjustments for companies like Eli Lilly and assessments of the healthcare sector's potential benefits from the AI market's volatility are also being observed.
