US tech shares have started to recover some of their losses after a steep selloff on Monday. The selloff was triggered by concerns about the rapidly advancing DeepSeek AI assistant from China. On Tuesday, Nvidia shares went up 8.9%.
The market reactions to DeepSeek are woefully unjustified.
Here is why ⬇️⬇️⬇️— Yann LeCun (@ylecun) January 28, 2025
This was after a big 17% drop on Monday. The tech sector as a whole rose 3.6%, getting back some of the losses from earlier in the week. DeepSeek’s rise in popularity has raised questions about the competitive edge of American companies in artificial intelligence.
💥 💥 💥 @sonusvarghese wrote this amazing and timely piece on DeepSeek, AI, tech stocks crashing, and what it all means. You'll definitely want to check this one out. @CarsonResearchhttps://t.co/mzVUHbkyAt
— Ryan Detrick, CMT (@RyanDetrick) January 28, 2025
Despite high-profile casualties of DeepSeek, like Broadcom and Nvidia (-11% and -4% YTD, respectively), most stocks have been doing well YTD: 375, corresponding to ~75%, of S&P 500 constituents are up this year, with >53% beating index
@SPDJIndices pic.twitter.com/rv7WXnDVNk— Liz Ann Sonders (@LizAnnSonders) January 29, 2025
The success of the AI assistant has brought volatility to tech markets, especially for firms heavily invested in AI research and development. Despite mixed performance of US and European tech shares, the bounce in Nvidia and other major tech stocks suggests investor confidence may be stabilizing after the recent turmoil.
DeepSeek impact on US tech stocks
The selloff on Monday was a reaction to the implications of DeepSeek, including for AI chipmaker Nvidia, one of the hardest-hit stocks. Markets don’t like uncertainty and they like visibility and moats. Tom Lee, chief investment officer at Fundstrat, said in an interview on CNBC’s “Closing Bell” that the market correction is likely an opportunity for long-term investors.
“To me, it’s an overreaction. The Nvidia decline is the worst since March 2020, and we know that ended up being a huge opportunity for investors,” Lee said. Lee also expressed optimism about the financial sector overall in 2025.
“Financials, to me, represent a pretty good fundamental case of change this year, because we have a new administration, a Fed that is dovish, and yields that aren’t painful for banks. This could lead to upside for capital markets activity, and multiples are low. So I think financials remain our number one S&P sector idea.”