After a significant sell-off in US tech stocks on Monday, investors returned to the market on Tuesday, driving a broad rebound. Nvidia, which suffered the largest single-day market capitalization loss in history on Monday, saw its stock price surge over 8% to close at $128.86. Major indexes also reversed course, with the S&P 500 gaining 0.92% and the tech-heavy Nasdaq Composite rising 2.03%.
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Nvidia stock chart showing rebound
DeepSeek’s Impact and the Resilience of US AI
Monday’s market downturn was triggered by the unveiling of DeepSeek, a cost-effective AI tool developed by a Chinese startup. This sparked concerns about the potential disruption of US dominance in the AI sector, leading to a widespread sell-off in tech stocks.
However, Tuesday’s rebound suggests a reassessment of the situation. Experts argue that the emergence of competitive AI solutions like DeepSeek could ultimately benefit the industry by driving down costs and expanding the applications of AI. Robert Teeter, chief investment strategist at Silvercrest Asset Management, emphasized that American AI companies remain strong and are well-positioned to capitalize on the growing demand for AI-driven solutions. He suggested that increased competition could lead to wider adoption of AI, boosting productivity and profit margins across various sectors.
Looking Ahead to Mega-Cap Tech Earnings
The market’s recovery also comes ahead of highly anticipated earnings reports from mega-cap tech companies like Tesla, Microsoft, and Meta, scheduled for Wednesday. Investors are hopeful that these reports will provide reassurance about the continued strength of the AI sector and the ongoing investments in AI-related hardware and infrastructure. Gene Munster, a managing partner at Deepwater Asset Management, raised questions about DeepSeek’s long-term sustainability in developing advanced AI capabilities while maintaining its low-cost model. Positive commentary from these industry leaders could further solidify the market’s confidence in the long-term prospects of AI.
Market Close and Sector Performance
At the closing bell on Tuesday, the Dow Jones Industrial Average also saw gains, rising 0.31% to 44,850.35. The semiconductor sector, which experienced significant losses on Monday, rebounded alongside Nvidia, with companies like Broadcom and Oracle showing strong gains. Bond yields also increased, reversing Monday’s trend as investors moved away from safe-haven assets. The 10-year Treasury yield climbed to 4.538%.
In conclusion, Tuesday’s market rebound indicates a renewed optimism in the tech sector, driven by the resilience of leading AI companies and anticipation of positive earnings reports. While the emergence of competitors like DeepSeek presents challenges, it also underscores the transformative potential of AI and the ongoing opportunities for growth and innovation in the industry.
