Nvidia rises 7% after Monday’s AI stock rout as bounce gains steam

Nvidia rose on Tuesday, clawing back some losses one day after the emergence of a cheaper, open-source artificial intelligence model from China caused the shares to post the biggest market value loss in stock market history.

Nvidia was last higher by about 7.3% on Tuesday, with the rally gaining steam throughout the session. The stock at one point shortly after the open was in the red.

That bounce comes after 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. But retail investors bought the dip at a record level as the sell-off gripped Wall Street, according to Vanda Research.

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

The S&P 500 and Nasdaq traded into the green following Nvidia on Tuesday as investors looked for a bounce in the AI bull market leader to restore confidence.

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 poster child 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 software industry. More powerful LLM models that can run at a fraction of the original cost estimates (if confirmed) will mean that genAI adoption should come easier … and hence, faster and broader across the software universe,” wrote Barclays analyst Raimo Lenschow.

To be sure, while Morgan Stanley’s Joseph Moore kept his overweight rating on the stock, he did trim his price target to $152 from $166 on Tuesday.

“The DeepSeek release highlights evolutionary innovations in AI, some of which may be deflationary. That said, the stock market reaction is probably more important than the cause, and could bring further export controls or reduce spending enthusiasm; trimming PTs but remain positive,” he said.

The Wall Street endorsements, however, failed to lift the stock. Nvidia shares are now down 23% from an all-time high reached earlier this month.