Monday’s big tech sell-off in shares across the world stemmed from the release of an artificial intelligence model launched by DeepSeek - but on Tuesday, some of those worst-hit stocks bounced back.
With a short period of time for reflection and re-judgement since the initial shock, which saw AI chipmaker Nvidia in particular initially sink 17 per cent, analysts and investors are now giving their thoughts and theories on what happened and, more notably for future events, whether the initial reaction was right or wrong.
Nvidia’s drop in share price on Monday marked the biggest ever one-day loss in market value on Wall Street, of about $589bn (£473bn). A day later, the same company rose around nine per cent to claim back some of those losses. For additional context, including this week’s drop, Nvidia shares remain up 14 per cent across six months and 111 per cent across the past year following a huge rise between March and July.
So what of the initial sell-off? According to experts in the field, much of it stems from misinformation or a lack of understanding.
“There are going to be moments where people are going to doubt it like [Monday] and there’s a lot of people who own these stocks who perhaps don’t know what they own and why they own it,” said billionaire hedge fund manager Steve Cohen, per the FT.
Cohen’s Point72 hedge fund incorporates one fund, which has raised around $1.5bn (£1.2bn), focusing particularly on AI-related assets.
Speaking at the Global Alts conference, he added: “There are a lot of people out there who talk who haven’t done the work, and they can misinform investors and they can misinform the public and we saw a little of that yesterday.”
Elyas Galou, global investment strategist at Bank of America, was more blunt. “What happened on Monday was an extreme overreaction that was amplified by extreme positioning,” they said, per the FT.
Cohen added that he saw the overall situation as a positive for investing and use in AI, as it “advances the move to artificial super intelligence”.
Microsoft CEO Satya Nadella suggested similar, noting that “more efficient and accessible” AI will see the use of it “skyrocket”.
In the meantime, those trying to foresee the individual winners of the AI arms race do not perhaps yet understand the full implications of what new competitors, new names in the market and changes to processes might mean.
“This abrupt reaction highlights that the market currently does not yet have adequate tools and information to assess the outlook for AI-driven electricity demand,” said Thomas Spencer, an energy and AI analyst at the International Energy Agency (IEA).
That sector was affected too - not just chipmakers and AI model creators - after DeepSeek’s assertion that their model was built more efficiently and required less energy to process requests.
Clearly, there will be further shifts ahead - not just in terms of share price but in who the leading players emerge as and which nations are at the forefront - as the brand new technology develops and is made more efficient in a number of ways.
For now though, it’s not a long-lasting impact on the stock market.
“DeepSeek’s appearance on the scene might have caused a shift in the narrative for tech stocks but it hasn’t been the catalyst for a sustained market sell-off,” explained Russ Mould, investment director at AJ Bell.
“US markets rebounded yesterday and look set to continue on the same path today ahead of two major events,” Mould noted, citing an interest rates decision in the US and the start of earnings season among the Magnificent Seven, with Meta, Microsoft and Tesla all set to file updates.
Outside of the US, Dutch chipmakers ASML were up five per cent on Wednesday by noon GMT, with German energy giant Siemens up almost four per cent.
