Finance
Nvidia is rebounding after biggest market cap loss in history, but it’s a fragile bounce
Nvidia CEO Jensen Huang delivers a keynote address at the Consumer Electronics Show (CES) 2025, showcasing the company’s latest innovations in Las Vegas, Nevada, USA, on January 6, 2025.
Artur Widak | Anadolu | Getty Images
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 3.7%. The stock’s bounce was much bigger earlier in the morning and was reducing as the 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.
Nvidia 1-day
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 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.
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