NOIDA (CoinChapter.com)— The debut of the Chinese AI model, DeepSeek, made major U.S. technology and AI-related firms’ stocks tumble. Nvidia’s shares plummeted nearly 17%, wiping out approximately $589 billion in market value—the largest single-day decline in the company’s history. Other tech giants, including Microsoft and Alphabet, suffered notable losses, contributing to a cumulative $1 trillion reduction in the leading U.S. tech index.
However, the market demonstrated resilience in the aftermath of the upheaval. Investors, recognizing potential overreactions, began reinvesting in these tech firms. Nvidia’s stock rebounded by over 8%, closing at $128.86, while the tech-heavy Nasdaq Composite and S&P 500 indices saw gains of nearly 2% and 1%, respectively. Semiconductor companies, which had borne the brunt of the initial sell-off, also showed signs of recovery.
Moreover, Broadcom and Oracle posted gains as confidence and calm returned to the market.
The market’s recovery underscores its recognition of the traders’ FUD. Additionally, the innovation inherent in these technology firms helped restore market confidence. DeepSeek’s emergence has impacted the AI sector, but U.S. tech and AI stocks rebounded, indicating investor confidence in their stability and competitiveness.
Nvidia’s 9% Rebound Signals Market Recovery Amid AI Sector Shock
Nvidia’s stock price surged nearly 11% to a daily high near $129, reversing Jan. 28’s DeepSeek debut-driven AI and tech stock crash. The stock rebounded from $116.7, aligning with the 0.382 Fibonacci retracement level, confirming strong demand at lower levels. Moreover, the bounce coincided with a broader tech sector recovery, as the Nasdaq Composite gained 2.2% to reach a daily high near $21,495. However, the Nasdaq remained below 21,600, its 0.618 Fibonacci level, showing that market sentiment is still fragile.
Furthermore, Nvidia faces immediate resistance near $133, where the NVDA’s 100-day (blue) EMA aligns with its 0.618 Fibonacci retracement. A break above this level could push the stock toward $145, a key confluence zone marked by the 0.786 Fib retracement and previous swing highs. If bulls sustain momentum, Nvidia could attempt a full retracement to $159, the Fib 1.0 level.
NVDA and NASDAQ Index daily price chart. Source: TradingviewHowever, the firm, whose chipsets form the backbone of the AI sector, could see its stock face selling pressure from a bearish pattern called the ‘death cross.’ NVDA’s 20-day EMA (red) formed this pattern by moving below its 50-day EMA (purple) trendline. Any positive update from DeepSeek could escalate the bearish risks against NVDA prices.
On the downside, $117 (0.382 Fib) and $107 (0.236 Fib) are critical support levels for the NVDA stock price. A breakdown below $107 could extend losses to $90.
The Nasdaq’s muted recovery reflects ongoing caution despite Nvidia’s sharp rebound. The index remains trapped below $21,600, highlighting investor hesitation about DeepSeek and its impact on AI stocks. Until a decisive breakout occurs, the broader market may struggle to regain strong bullish momentum.
Market Reaction to DeepSeek’s Emergence
The initial market turmoil following DeepSeek’s AI Assistant launch can be attributed to several factors. Foremost, the U.S. had implemented stringent export controls to curb China’s access to advanced AI chips, aiming to maintain a technological edge. Despite these measures, DeepSeek’s rapid development and deployment of a competitive AI model highlighted the limitations of such restrictions.
Even under constrained conditions, the company’s ability to innovate challenged the prevailing assumption that cutting-edge AI development necessitates substantial capital and exclusive access to premium hardware.
Nvidia, a major supplier of AI chips, suffered the most significant losses, as investors feared that China’s AI sector could progress without reliance on U.S. technology. Broadcom, Marvell Technology, and other semiconductor firms also saw sharp declines.
However, the realization that the AI race is far from over prompted a market rebound as investors assessed the long-term positioning of U.S. firms in the global AI landscape.
Palmer Luckey blasts DeepSeek AI hype, calls it a Chinese psyop targeting U.S. tech giants.Yet, some believed that DeepSeek’s claims were fake and that the drop in AI stocks was due to bad journalism fanning the flames of FUD. Palmer Luckey, founder of Oculus and defense tech firm Anduril, claims DeepSeek’s $5M training cost is false. He alleges that a Chinese hedge fund manipulated the narrative to hurt U.S. tech stocks like Nvidia.
Luckey argued that the U.S. media amplifies this as a psyop against Trump. While his concerns hold weight, his framing lacks hard evidence.
In response to China’s accelerated progress in AI, U.S. technology firms are reassessing their strategies. There is a growing recognition of the need to enhance research and development efforts, foster collaborations, and advocate for supportive policies to maintain competitiveness.
Industry leaders emphasize that export bans have pushed Chinese companies toward greater self-sufficiency rather than stifling China’s progress. The shift could force American firms to innovate faster, invest more in proprietary AI models, and accelerate partnerships with AI startups to maintain dominance.
The post Nvidia Leads AI Stock Rebound as DeepSeek Shockwaves Subside appeared first on Coinchapter.
