Jamie Spencer
U.S. stocks edged higher on Tuesday as investors attempted to recover from Monday’s DeepSeek-driven sell-off, which sent technology shares tumbling. The rebound, while modest, signaled renewed confidence in AI stocks, particularly Nvidia (NVDA), which was at the center of recent market volatility.
Market Gains After Sharp Decline
The major indexes bounced back after Monday’s losses:
- S&P 500: up 0.4%, led by gains in technology stocks.
- Nasdaq Composite: increased 1% after Monday’s 3.5% decline.
- Technology Select Sector SPDR Fund (XLK): rose 1.5% after losing 4.9% the previous day.
- Dow Jones Industrial Average: gained 47 points (0.1%).
Nvidia in Focus
Nvidia, the AI bull market leader, saw a modest rebound of 3% on Tuesday. However, the recovery lacked strong momentum after its historic 17% drop on Monday, which wiped out nearly $600 billion in market value—the largest single-day loss for a U.S. company.
Oracle (ORCL) also climbed 3% after steep losses the day before.
DeepSeek’s AI Challenge Shakes Markets
The DeepSeek threat intensified on Monday following viral discussions on social media over the weekend. The Chinese AI startup introduced a free, open-source large language model last month, claiming it cost less than $6 million to develop—far less than AI models from OpenAI, Google, and Meta.
On Monday, DeepSeek’s AI assistant became the most-downloaded free app in the U.S. on Apple’s App Store, surpassing OpenAI’s ChatGPT.
Tech Valuations Under Pressure
DeepSeek’s low-cost AI approach has raised concerns over the sustainability of AI-driven stock gains. Terry Sandven, chief equity strategist at U.S. Bank Wealth Management, commented:
“The news from DeepSeek introduces an element of uncertainty into the marketplace. If you can provide products at a lower cost, that changes the investment thesis and puts pressure on valuations.”
Despite this, Sandven maintained a positive outlook on technology stocks.
Investors Turn to Earnings Reports
Market attention is shifting toward upcoming corporate earnings, with several Magnificent Seven tech giants set to report:
- Meta Platforms (META)
- Microsoft (MSFT)
- Tesla (TSLA)
- Apple (AAPL)
These reports will be critical in determining whether the recent AI-driven rally can regain momentum.
Federal Reserve’s Rate Decision Looms
Investors are also watching the Federal Reserve’s policy decision on Wednesday. Wall Street widely expects the Fed to pause its rate-cutting campaign and hold interest rates steady. However, uncertainty remains over how many rate cuts Fed Chair Jerome Powell will signal for 2025.
Conclusion
After a turbulent Monday, stocks staged a partial recovery, led by technology shares. While DeepSeek’s emergence has created uncertainty around AI investments, upcoming earnings reports and the Federal Reserve’s guidance will determine whether market sentiment stabilizes in the coming weeks.
