Nvidia experienced a rebound on Tuesday, recovering some of the losses incurred a day earlier when a more affordable, open-source artificial intelligence model from China caused the company to suffer the largest single-day market value drop in stock market history. The stock surged by 8. 8%, with momentum building throughout the day and nearing session highs by closing. Initially, shortly after the market opened, it was trading in the negative territory. This increase follows a 17% plunge on Monday, which erased over $595 billion from Nvidia’s market valuation, marking the steepest daily market cap drop on record. Nevertheless, retail investors capitalized on the dip, purchasing shares at unprecedented levels, even as broader sell-offs impacted Wall Street, according to Vanda Research. Despite the rally, Nvidia’s shares are still down more than 9% for the week. The substantial decline on Monday sent shockwaves through the tech sector, with the Nasdaq Composite falling 3%, amid concerns that an AI stock bubble might burst due to the emergence of the Chinese startup DeepSeek. On Tuesday, both the S&P 500 and Nasdaq recovered slightly, following Nvidia’s lead, as investors hoped for a resurgence in the AI bull market to restore confidence. However, the stock remains approximately 8% lower for the week. DeepSeek unveiled its open-source model last week, which reportedly surpassed OpenAI's in various tests. The startup also indicated that the initial development cost for this model was under $6 million, significantly less than the billions major U. S.

tech companies are dedicating to AI. Nvidia, notable for its powerful chips and as a key player in the U. S. AI market, acknowledged DeepSeek’s R1 model as "an excellent AI advancement. " An Nvidia spokesperson remarked to CNBC on Monday, "DeepSeek's work illustrates how new models can be developed using that technique, utilizing widely available models and computing resources that comply with export controls. " Furthermore, most analysts on Wall Street have maintained their support for Nvidia post-sell-off, with no downgrades reported so far. Some suggest that the developments from DeepSeek could yield long-term advantages for the AI sector. Barclays analyst Raimo Lenschow noted, "We believe investors should distinguish between the potential benefits and challenges that DeepSeek presents to the software industry. Enhanced LLM models that can operate at a fraction of original cost estimates (if validated) will likely facilitate deeper and faster adoption of genAI across the software industry. "