Nvidia stock begins recovery after DeepSeek AI frenzy prompted near $600 billion loss

Nvidia (NVDA) stock rose nearly 9% Tuesday as the AI chipmaker began to recover from a massive decline the prior day that shaved nearly $600 billion off its market cap.

Nvidia’s 17% freefall Monday was prompted by investor anxieties related to a new, cost-effective artificial intelligence model from the Chinese startup DeepSeek. Some Wall Street analysts worried that the cheaper costs DeepSeek claimed to have spent training its latest AI models, due in part to using fewer AI chips, meant US firms were overspending on artificial intelligence infrastructure.

That created a concern among the investment community that Nvidia’s high GPU (graphics processing unit, or AI chip) prices could come under pressure and that demand for semiconductors could wane.

Nvidia’s $589 billion market cap decline was the largest single-day loss in stock market history.

The DeepSeek announcements drove down not only Nvidia but the market at large, with the tech-heavy Nasdaq (^IXIC) dropping 3%. Chip stocks dropped across the board Monday, but some names began to recover. After dropping more than 17% to start the week, Broadcom (AVGO) rose 2.6% Tuesday.

Nvidia itself didn’t express much anxiety over the DeepSeek buzz, calling R1 “an excellent AI advancement” in a statement Monday.

Wall Street analysts continued to reflect on the DeepSeek-fueled market rout Tuesday, expressing skepticism over DeepSeek’s reportedly low costs to train its AI models and the implications for AI stocks.

JPMorgan analyst Harlan Sur and Citi analyst Christopher Danley said in separate notes to investors that because DeepSeek used a process called “distillation” — in other words, it relied on Meta’s (META) open-source Llama AI model to develop its model — the low spending cited by the Chinese startup (under $6 billion to train its recent V3 model) did not fully encompass its costs.

“We believe it is crucial to validate these costs before drawing conclusions,” Sur wrote.

Danley added: “Given Deepseek is based on leveraging cloud service providers [Meta] and AI is still in its infancy, we lean towards the argument of continued strong growth in AI spending.”

Even so, DeepSeek “clearly doesn’t have access to as much compute as US hyperscalers and somehow managed to develop a model that appears highly competitive,” Raymond James analyst Srini Pajjuri wrote in a note to investors Monday.

Laura Bratton is a reporter for Yahoo Finance. Follow her on Bluesky @laurabratton.bsky.social. Email her at laura.bratton@yahooinc.com.

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