LONDON: US stocks along with shares in AI chip-making giant Nvidia struggled on Tuesday to rise from a record-breaking market wipeout sparked by the launch of a low-cost Chinese artificial intelligence model DeepSeek that threatens the dominance of US tech firms.
In the last session, Nvidia lost $593 billion in market value – a record one-day loss for any company, while shares of companies in semiconductor, power and infrastructure companies exposed to AI collectively shed more than $1 trillion.
US tech shares tanked Monday, with Nvidia tumbling 17 percent, after China’s DeepSeek unveiled its R1 chatbot, which can apparently match the capacity of top US AI products for a fraction of their development costs.
Other AI-linked stocks were mixed with Oracle (ORCL.N), up 1.4% and Micron <MU.O> down 1.3%. Tech shares in Europe turned lower as the session progressed.
The tech-heavy Nasdaq was little changed in morning deals on Tuesday after dropping more than three percent the previous day. The Dow also steadied but the wider S&P index was lower.
Nvidia, which designs chips used in AI applications, was down 0.4 percent in early trading Tuesday.
Elsewhere, European stock markets rose and oil prices advanced, as traders also awaited interest-rate decisions from the US Federal Reserve and European Central Bank due this week.
Nvidia’s drop Monday wiped more than half-a-trillion dollars from its market capitalisation — the largest single-day loss in stock market history.
The Nvidia sell-off “may have gone too far”, said Kathleen Brooks, research director at XTB, especially given some doubts about 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,” she said.
Monday’s selloff was the result of a free AI assistant launched by Chinese startup DeepSeek, which had claimed that its models use less data at a fraction of the cost of services currently available.
Even though there was scepticism, over DeepSeek’s cost claims, OpenAI CEO Sam Altman called it an “impressive model”, while US President Donald Trump called it “a wakeup call for our industries”.
“We will obviously deliver much better models and also it’s legit invigorating to have a new competitor!” Altman, the head of the AI firm behind ChatGPT, said, in a social media post.
DeepSeek bursting onto the AI scene has upended the industry’s perception that China was years behind its bigger US rivals.
Gains in US equities last year were driven by a handful of large tech stocks, and the wider stock market largely avoided Monday’s rout.
Nvidia has been the standout company leading a drive by investors to seek out all things AI while ignoring the massive sums it and companies such as Google and Microsoft are investing.
“For the most part, financial markets are steadier this morning,” said David Morrison, senior analyst at Trade Nation.
“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,” he said.
Earlier, Tokyo fell as AI-linked companies were pulled lower and Trump’s comments raised fears of a trade war.
US President Donald Trump weighed in on Monday, saying the release of DeepSeek’s model “should be a wake-up call for our industries that we need to be laser-focused on competing to win”.
The dollar rose after Trump said he wanted universal tariffs “much bigger” than the 2.5 percent suggested by his Treasury Secretary Scott Bessent, fanning fresh fears about a trade war.
ALSO READ: What is DeepSeek and How It’s Disturbing the AI World Order?
Trump said he wants high tariffs on imported metals, pharmaceuticals and semiconductors.
Investors will turn their attention to interest-rate decisions this week.
The US Federal Reserve’s policy-making committee meets Wednesday and is largely expected to leave rates unchanged, despite Trump’s calls for lower interest rates from the officially independent central bank.
On Thursday, 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.
New York – Dow: UP 0.1 percent at 44,740.34 points
New York – S&P 500: DOWN 1.5 percent at 6,011.27
New York – Nasdaq Composite: DOWN 0.1 percent at 19,326.27
London – FTSE 100: UP 0.7 percent at 8,564.45
Paris – CAC 40: UP 0.7 percent at 7,938.94
Frankfurt – DAX: UP 0.7 percent at 21,428.25
Tokyo – Nikkei 225: DOWN 1.4 percent at 39,016.87 (close)
Hong Kong – Hang Seng Index: UP 0.1 percent at 20,225.11 (close)
Shanghai – Composite: Closed for a holiday
Euro/dollar: DOWN at $1.0438 from $1.0492 on Monday
Pound/dollar: DOWN at $1.2436 from $1.2496
Dollar/yen: UP at 155.42 yen from 154.61 yen
Euro/pound: DOWN at 83.90 pence from 83.94 pence
Brent North Sea Crude: UP 1.4 percent at $78.12 per barrel
West Texas Intermediate: UP 1.5 percent at $74.25 per barrel
