Nvidia Stock Recovers Slightly After Massive AI-Driven Decline
Nvidia Corporation (NVDA) shares witnessed a premarket surge of up to 2.6% on Tuesday, indicating a recovery from the steep decline experienced the previous day. However, early trading gains were later trimmed, with shares showing a modest increase of less than 1% after market open.
The earlier plunge of 17% on Monday stemmed from investor concerns sparked by the introduction of a new, budget-friendly artificial intelligence (AI) model by Chinese startup DeepSeek. Wall Street analysts expressed apprehensions that DeepSeek's reported lower training costs, attributed to reduced AI chip usage, could signal overspending by US firms on AI infrastructure. This raised concerns about potential pressure on Nvidia's premium GPU prices and a possible decline in semiconductor demand.
Nvidia's market capitalization suffered a significant loss of $589 billion, marking the largest single-day decline in stock market history. The DeepSeek announcement had a ripple effect on the broader market, leading to a 3% drop in the tech-heavy Nasdaq Composite Index (^IXIC). Chip stocks across the industry experienced declines on Monday, but some began to recover on Tuesday morning.
Despite its massive loss, Nvidia displayed resilience, dismissing concerns over DeepSeek and describing its R1 model as an "excellent AI advancement" in a statement released Monday.
Analysts continue to assess the impact of DeepSeek on AI stocks, with some expressing skepticism about the startup's reported low training costs and its implications. However, they also acknowledge the potential for continued AI spending growth, given the infancy of the industry.
Despite the recent market volatility, Nvidia's long-term prospects remain strong, backed by its leadership in the AI chip market and the increasing demand for AI technologies across various industries.