DeepSeek: Nvidia, US stocks close higher after Chinese AI shock

Nvidia clawed back some of yesterday's losses. Photo / Getty Images

US stocks and shares in chip-making giant Nvidia on Tuesday clawed back some of their losses following a steep sell-off a day earlier triggered by the sudden success of Chinese artificial intelligence (AI) firm DeepSeek.

American tech shares tanked on Monday, local time, with Nvidia tumbling almost 17%, after China’s DeepSeek unveiled its R1 chatbot, which it claims can match the capacity of top US AI products for a fraction of their costs.

Nvidia, which designs chips used in AI applications, clawed back gains of 8.9% on Tuesday, leaving it well below last week’s levels.

All three major indices on Wall Street finished higher, with the Nasdaq Composite rising 2.0% buoyed by a rise in tech stocks, reversing some of its losses from Monday.

Despite these gains, Briefing.com’s Patrick O’Hare noted that this was not a broad market advance.

The rally was “probably more of a reflection of people embracing the idea that yesterday’s sell-off in these mega-cap and AI plays was overdone”, O’Hare said.

Elsewhere, European stock markets were mixed while oil prices inched up, as traders awaited interest-rate decisions from the US Federal Reserve and European Central Bank this week.

Nvidia bounce-back

Nvidia’s Monday plunge (UST) wiped close to US$600 billion ($1.05 trillion) from its market capitalisation – the largest single-day loss for a public company in stock market history, at least in non-inflation-adjusted dollar terms.

The Nvidia sell-off “may have gone too far”, said Kathleen Brooks, research director at XTB, adding that there were doubts over 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,” Brooks added.

Gains in US equities last year were driven by a handful of large tech stocks, led by Nvidia, and the wider stock market largely avoided Monday’s rout.

“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,” said David Morrison, senior analyst at Trade Nation.

Earlier, Tokyo fell as AI-linked companies were pulled lower and new comments by US President Donald Trump rattled analysts.

The dollar rose after Trump said Monday that he wanted universal tariffs “much bigger” than the 2.5% suggested by his newly-confirmed 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 Federal Reserve’s policy-making committee meets on Wednesday and is largely expected to leave rates unchanged, despite Trump’s calls for lower interest rates from the independent US central bank.

A day later, 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.

© Agence France-Presse