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By Sinéad Carew, Medha Singh, Amanda Cooper
NEW YORK/BENGALURU/LONDON (Reuters) -Technology shares on Tuesday regained some ground lost and AI chip leader Nvidia rose more than 6% after the previous day's record-breaking wipeout sparked by a low-cost Chinese artificial intelligence model that threatens the dominance of U.S. rivals.
On Monday, Nvidia lost about 17% or close to $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.
Monday's selloff was prompted by the release of a free AI assistant launched by China's DeepSeek last week that the startup said uses less data at a fraction of the cost of incumbent services. That garnered attention worldwide, although skepticism lingers over DeepSeek's cost claims.
While the broader technology sector was up 2.7% on Tuesday, the Philadelphia semiconductor index was down 0.2% after falling 9.2% on Monday, its deepest one-day percentage drop since March 2020.
"Today's recovery is to be anticipated given the magnitude of yesterday's selloff," said Cody Acree, chip industry analyst at Benchmark Company. "Everything was taken down en masse without much foresight into each company's exposure."
Acree said that Monday's selloff may lead investors to think twice about how much they want to pay for AI-related companies. But he does not see the emergence of cheaper AI models negating the need for more advanced chips.
"You'll need both economically sensitive models without the most advanced performance as well as the leading edge which will continue to be pushed by the large foundational models, which will continue to consume the vast majority of computing horsepower," said Acree.
"DeepSeek represents an increase in competition. Never have we seen an industry where an increase in competition leads to lower spending," he added.
Nvidia shares were last trading above $126 after a choppy start on Tuesday, but were still trading well below Friday's $142.62 close. Oracle was up 3.3% after falling about 13.8% on Monday. Marvell Technology shares were up 2.7% after falling 19% in the previous session.
While there were some doubts over DeepSeek's cost claims, Sam Altman, CEO of Microsoft-backed OpenAI, called the company an "impressive model," while U.S. 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.