Tech Stocks Stage Partial Recovery After Market Rout Sparked By Deepseek's Rise

DeepSeek released a model last week that challenged OpenAI's offering in price and capability.

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• Nvidia stock bounced back after plunging as much as 18% on Monday.
• The sudden rise of China's AI upstart DeepSeek sparked a tech rout on Monday.
• DeepSeek has challenged market narratives around AI, valuations, and high spending.

AI-related stocks staged a partial recovery following Monday's tech rout sparked by the sudden rise of Chinese startup DeepSeek.

Chip titan Nvidia closed almost 9% higher on Tuesday, recovering about half its losses and pushing its market cap back above $3 trillion. The stock was 0.4% lower in premarket trading.

Nasdaq futures were about 0.4% higher at 6:30 a.m. ET, with a more modest gain for S&P futures ahead of the opening bell.

"Calm has descended on financial markets after the AI upheaval, which triggered a wave of selling, with investors seeing sharp falls as a buying opportunity," said Susannah Streeter of Hargreaves Lansdown in a morning note.

"Focus is switching to today's key Fed meeting and the direction of interest rates in the US."

Chip equipment maker ASML jumped as much as 10% in morning trading in Amsterdam, while Taiwan's TSMC ended 1.3% higher.

Christophe Fouquet, the CEO of ASML, said the advent of cheaper AI models from the likes of DeepSeek could be a positive.

"A lower cost of AI could mean more applications. More applications means more demand over time — we see that as an opportunity for more chips demand," he told CNBC on Wednesday.

An AI model from DeepSeek, a Chinese artificial intelligence startup, called R1 offers a new level of "reasoning" at a far lower cost than OpenAI's model despite having comparable capabilities.