Nvidia is rebounding after biggest market cap loss in history, but it's a fragile bounce

cnbc.com:

In this article

Nvidia shares traded higher in the premarket Tuesday, as traders reassessed the implications of a much cheaper-to-build large-language model for the artificial intelligence trade.

The chipmaker's rebound in the early session was shaky, with it up about 3%. The stock's bounce was much bigger earlier in the morning and was reducing as the official market open neared.

The stock plunged 17% on Monday and slashed more than $595 billion from the company's valuation, the biggest single-day market cap decline on record.

Monday's steep sell-off — which sent shockwaves across the broader tech industry, with Nasdaq Composite dropping 3% —  came as traders grew fearful that an AI stock bubble could burst due to the emergence of Chinese startup DeepSeek.

DeepSeek last week released an open-source model that reportedly outperformed OpenAI's in different tests. The company also said the initial version of this model cost less than $6 million to build — a fraction of the billions of dollars major U.S. tech companies are spending on AI.

To be sure, Nvidia — which has been the posterchild of the U.S. AI trade due to its high-powered chips  — called DeepSeek's R1 model "an excellent AI advancement."

«DeepSeek's work illustrates how new models can be created using that technique, leveraging widely-available models and compute that is fully export control compliant,» an Nvidia spokesperson told CNBC on Monday.

Additionally, most Wall Street analysts stood by Nvidia after the sell-off, with none of them downgrading the stock thus far. Some also see the DeepSeek developments as a long-term positive for AI.

«We think investors need to differentiate between the impacts around potential benefits and drawbacks of DeepSeek for the