Chip Stocks (NVDA) Rebound as DeepSeek Fears Ease, Nvidia Lags

Chip stocks staged a partial rebound on Wednesday following a dramatic selloff triggered by the emergence of China’s DeepSeek AI tool. European semiconductor shares led the recovery, with ASML (ASML) surging nearly 8% after reporting a stronger-than-expected rise in new orders. The rally extended to U.S. chip equipment makers, though gains were more muted as Nvidia remained under pressure, falling 2.7% to $125.44. The Philadelphia Semiconductor Index edged up just 0.1%, as investors assessed whether the AI-driven correction had run its course.

Despite the bounce, Nvidia (NVDA) remains well below last week’s record highs, with its market value still reeling from Monday’s nearly $600 billion wipeout—the worst single-day drop for any company in history. The AI chip giant has borne the brunt of investor anxiety that DeepSeek’s low-cost AI model could shift the economics of the industry. Some analysts, however, argue that AI chip demand will remain resilient, even if the sector faces valuation pressure in the near term.

• European chip stocks surge, led by ASML’s 8% rally.
• Nvidia extends losses, weighing on Nasdaq’s (QQQ) performance.
• AI-driven correction remains in focus as investors reassess valuations.

• DeepSeek’s AI tool spooked markets, erasing nearly $1 trillion from chip and tech stocks.
• ASML’s strong bookings suggest demand for semiconductor equipment remains solid.
• Microsoft (MSFT) and Meta (META) earnings will provide a key test for AI spending outlook.

• Fed policy decision looms as rate cuts expectations shift.
• Microsoft and OpenAI investigating potential data misuse by DeepSeek.
• Investors await signs that AI chip spending will remain robust despite competition.

• The rebound in European semiconductor stocks, led by ASML’s 8% rally, highlights resilience in the chip sector despite recent volatility, signaling continued demand for AI-related technologies.
• Nvidia’s dominance in the AI chip market remains intact, with analysts noting that DeepSeek still relies on Nvidia GPUs for its low-cost AI model, potentially driving long-term demand for Nvidia’s products.
• DeepSeek’s breakthrough could accelerate broader AI adoption by making the technology more cost-efficient, creating new opportunities for chipmakers to supply a growing market.
• The Philadelphia Semiconductor Index’s stabilization (+0.1%) suggests that investor fears may be overblown, with strategists viewing the recent selloff as a buying opportunity for undervalued chip stocks.
• Microsoft and Meta’s upcoming earnings reports may reaffirm strong AI spending trends, providing a tailwind for semiconductor companies reliant on cloud and data center investments.

• DeepSeek’s low-cost AI model raises concerns about the sustainability of Nvidia’s premium pricing strategy, potentially pressuring margins and reducing demand for high-end GPUs.
• The $600 billion market value loss experienced by Nvidia underscores the fragility of tech stock valuations, particularly in the AI sector, where competition is intensifying.
• Investors remain cautious about whether the AI-driven correction has fully run its course, with the Philadelphia Semiconductor Index edging up just 0.1%, reflecting lingering uncertainty.
• Reports that Microsoft and OpenAI are investigating potential data misuse by DeepSeek add another layer of risk to the competitive dynamics in the AI space, potentially impacting U.S. tech leadership.
• Broader concerns about stretched valuations in the semiconductor sector could lead to further selloffs if earnings fail to meet elevated expectations or if competition from firms like DeepSeek intensifies.

Investor focus now turns to the Federal Reserve’s policy meeting and earnings reports from key AI players, including Microsoft and Meta. Their results will be closely watched for clues on AI investment trends and whether the sector can sustain its rapid growth. Meanwhile, reports that Microsoft and OpenAI are probing whether DeepSeek improperly used ChatGPT’s technology have added another layer of uncertainty, as competition in the AI space intensifies.

While some strategists argue that AI’s long-term trajectory remains intact, stretched valuations and rising competition could make earnings season a decisive moment for semiconductor stocks. As Jefferies economist Mohit Kumar put it, “The DeepSeek story is part of the evolution of AI. Some sectors will remain under pressure, but others will move higher.” Investors will now be looking for evidence to support that thesis in the coming weeks.