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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Nvidia stock has started a steady recovery after the recent DeepSeek AI frenzy caused the tech giant to suffer a near $600 billion loss in market value.
Investors were initially spooked by the sudden surge in interest surrounding DeepSeek AI, a new artificial intelligence technology that has been hailed as a game-changer in the industry. This led to a massive sell-off of Nvidia shares, causing the stock price to plummet.
However, in the days following the initial panic, Nvidia stock has shown signs of resilience and has begun to claw back some of its lost value. The company’s strong fundamentals and solid track record have helped to reassure investors that the recent downturn was more of a temporary blip than a long-term trend.
Analysts are now cautiously optimistic about Nvidia’s prospects moving forward, with many predicting that the stock will continue to rebound in the coming weeks. While the DeepSeek AI frenzy may have caused some turbulence in the market, it seems that Nvidia is well-positioned to weather the storm and emerge stronger than ever.
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