In the US, the spotlight remained on Nvidia, whose chips are powering much of the move into AI and whose stock has become a symbol of the surrounding frenzy. It rose 8.8 per cent after plunging nearly 17 per cent the day before, which was its worst drop since the 2020 COVID crash.
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Other AI-related companies also held steadier, including chip company Broadcom, which rose 2.6 per cent. Constellation Energy picked up 1.4 per cent after plummeting nearly 21 per cent on Monday. It had earlier rallied on expectations it will help supply the electricity that vast AI data centres would gobble up.
Such revenues are threatened after DeepSeek said it was able to develop a large language model that can perform as well as big US rivals, but at a fraction of the cost. That raises questions about whether all the spending expected for AI chips and electricity will need to happen.
AI-related stocks have been Wall Street’s biggest stars in recent years, soaring on expectations that big spending will only continue to grow. The gains, though, also created criticism that their stock prices had simply gone too high, too fast.
It’s still uncertain how much DeepSeek’s development will upend the AI industry. While it could mean less growth in spending than expected for data centres, electricity and chips, it could also boost other areas.
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“If AI becomes less expensive to use, we think businesses will adopt it more quickly, making a greater investment in AI software,” according to James Egelhof, chief US economist at BNP Paribas. “We think this acceleration in adoption could mean a rise in software investment that offsets – or even dwarfs – any deceleration in spending on data centre structures, hardware and related investment.”
Outside of AI-related industries, stocks held up fairly well on Monday on Wall Street, and they were mixed on Tuesday following a set of mixed profit reports.
Cruise operator Royal Caribbean steamed 12 per cent higher after it topped analysts’ profit expectations for the end of 2024. It benefited from stronger-than-expected demand from customers booking trips closer to the time of departure. The company also gave a profit forecast for the first three months of 2025 that beat analysts’ expectations.
JetBlue Airways, meanwhile, lost a quarter of its value, 25.7 per cent, despite reporting a milder loss for the latest quarter than analysts expected. The company expects its costs outside of fuel to rise more quickly at the start of 2025 than a key underlying measure of its revenue.
Later this week will come profit reports from some of Wall Street’s most influential companies, including Apple, Meta Platforms, Microsoft and Tesla.
In the bond market, which had been driving much of Wall Street’s action before Monday’s upheaval, Treasury yields held relatively steady.
The yield on the 10-year Treasury remained at 4.53 per cent, where it was late on Monday. It’s been climbing in recent months as traders pared back expectations for how many cuts the Federal Reserve will deliver to short-term interest rates this year. The US economy remains solid, and worries are high that tariffs and other policies potentially coming from President Donald Trump could put upward pressure on inflation.
with Bloomburg
