Nvidia’s stock rebounded nearly 9% on Tuesday after suffering a historic decline the day before, when concerns over a new AI model from Chinese startup DeepSeek triggered a selloff that erased nearly $600 billion from its market capitalization. The 17% plunge on Monday marked the largest single-day loss in stock market history and sent shockwaves across the tech sector, with the Nasdaq dropping 3% and chip stocks tumbling across the board.
Investor fears stemmed from DeepSeek’s latest AI model, which was reportedly trained at a significantly lower cost than typical US models. The startup claimed to have spent under $6 billion using a process called “distillation,” leveraging Meta’s open-source Llama AI model. This raised questions on Wall Street about whether US firms were overpaying for AI infrastructure and if Nvidia’s premium-priced GPUs might face pricing pressure amid shifting market dynamics.
Despite the turmoil, Nvidia remained unfazed, calling DeepSeek’s model “an excellent AI advancement.” Analysts also expressed skepticism about the reported training costs, noting that they might not fully capture all expenses involved. JPMorgan’s Harlan Sur emphasized the need to validate these figures before drawing conclusions, while Citi’s Christopher Danley pointed out that AI remains in its early stages, making continued investment likely.
Raymond James analyst Srini Pajjuri acknowledged DeepSeek’s achievement, noting that despite lacking the computational resources of US tech giants, the startup had developed a model that appeared highly competitive. While Monday’s panic sparked broad market declines, chipmakers began to recover, with Broadcom gaining 2.6% after its sharp drop at the start of the week.
As the dust settles, questions remain about the long-term implications for Nvidia and the AI industry. However, analysts largely maintain confidence in the continued demand for high-performance semiconductors, reinforcing expectations of strong growth in AI spending despite short-term volatility.
