US stocks and shares in chip-making giant Nvidia steadied Tuesday following a sell-off that was triggered by the sudden success of Chinese AI firm DeepSeek.
US tech shares tanked Monday, with Nvidia tumbling 17 percent, after China’s DeepSeek unveiled its R1 chatbot, which can apparently match the capacity of top US AI products for a fraction of their development costs.
The tech-heavy Nasdaq was little changed in morning deals on Tuesday after dropping more than three percent the previous day. The Dow also steadied but the wider S&P index was lower.
Nvidia, which designs chips used in AI applications, was down 0.4 percent in early trading Tuesday.
Elsewhere, European stock markets rose and oil prices advanced, as traders also awaited interest-rate decisions from the US Federal Reserve and European Central Bank due this week.
Nvidia’s drop Monday wiped more than half-a-trillion dollars from its market capitalisation – the largest single-day loss in stock market history.
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The Nvidia sell-off “may have gone too far”, said Kathleen Brooks, research director at XTB, especially given some doubts whether DeepSeek’s AI was developed as cheaply as it claims.
“It may be too early to write off Nvidia yet, even though the prospect of a Chinese rival is causing a crisis for the chip maker,” she said.
Gains in US equities last year were driven by a handful of large tech stocks, and the wider stock market largely avoided Monday’s rout.
Nvidia has been the standout company leading a drive by investors to seek out all things AI while ignoring the massive sums it and companies such as Google and Microsoft are investing.
“For the most part, financial markets are steadier this morning,” said David Morrison, senior analyst at Trade Nation.
“It’s difficult to work out if the worst is now over, or if yesterday’s slump was just another sign that the top is already in for US equities,” he said.
Earlier, Tokyo fell as AI-linked companies were pulled lower and Trump’s comments raised fears of a trade war.
US President Donald Trump weighed in on Monday, saying the release of DeepSeek’s model “should be a wake-up call for our industries that we need to be laser-focused on competing to win”.
The dollar rose after Trump said he wanted universal tariffs “much bigger” than the 2.5 percent suggested by his Treasury Secretary Scott Bessent, fanning fresh fears about a trade war.
Trump said he wants high tariffs on imported metals, pharmaceuticals and semiconductors.
Investors will turn their attention to interest-rate decisions this week.
The US Federal Reserve’s policy making committee meets Wednesday and is largely expected to leave rates unchanged, despite Trump’s calls for lower interest rates from the officially independent central bank.
On Thursday, the European Central Bank will hold a press conference after its first meeting of the year, with some analysts expecting a small cut in lending rates. AFP
