Prime Highlights:
Nvidia’s stock rose 8.8% on Tuesday, recovering from a 17% drop on Monday, which marked the largest single-day market cap loss in history, wiping out over $595 billion.
The sharp decline was sparked by concerns over a cheaper, open-source AI model from Chinese startup DeepSeek, which reportedly outperformed OpenAI’s model and cost far less to develop.
Despite the market sell-off, retail investors capitalized on the dip, purchasing Nvidia shares at record levels, as noted by Vanda Research.
Key Background:
Nvidia’s stock surged 8.8% on Tuesday, recovering some of the significant losses sustained the previous day. This rally came in the wake of a 17% plunge on Monday, which marked the largest single-day market capitalization drop in stock market history, erasing over $595 billion in value. The sharp decline was triggered by concerns surrounding a new, cheaper AI model from Chinese startup DeepSeek, which allegedly outperformed OpenAI’s model and raised fears of an impending AI stock bubble.
Despite opening the day in negative territory, Nvidia shares gained momentum as the session progressed, ending near their session highs. Retail investors took advantage of the dip, according to Vanda Research, purchasing Nvidia shares at record levels even as broader market sentiment remained shaky. However, despite Tuesday’s recovery, Nvidia is still down over 9% for the week, with the stock 23% below its recent all-time high.
The initial market rout on Monday sent shockwaves through the tech sector, with the Nasdaq Composite falling 3%. Investors feared that DeepSeek’s open-source model, which reportedly cost less than $6 million to develop, could undermine the financial viability of larger U.S. tech companies, who have invested billions into AI development. In response, Nvidia acknowledged the significance of DeepSeek’s model but emphasized that it represented a positive development for the AI sector as a whole.
Analysts largely stood by Nvidia, with most refraining from downgrading the stock. Some saw the DeepSeek model as a long-term positive, believing that more affordable AI models could accelerate adoption of generative AI technologies. While Morgan Stanley slightly lowered its price target for Nvidia, the firm’s analyst maintained an optimistic outlook. Despite recent volatility, Nvidia continues to be a central player in the AI space, with Wall Street remaining cautiously confident in its long-term prospects.
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