US equity markets show signs of recovery after a tech sector downturn, with the S&P and Nasdaq futures regaining ground following a steep decline. The rebound comes as analysts weigh in on AI model concerns sparking market volatility.
The tech-heavy Nasdaq dropped over 3% on Monday, its worst single-day showing in more than a month. However, futures tied to the S&P 500 and the Nasdaq were higher on Tuesday after steep losses in the previous session.
AI Model Concerns Spark Market Volatility
Monday’s selloff came after Chinese startup DeepSeek launched AI models that are reportedly on par or better than industry-leading models in the United States at a fraction of the cost. Analysts at BCA Research noted that the eye-watering sums spent on AI capex by mega-cap tech companies could be somewhat obsolete if a cheaper solution exists.
Rebound in Tech Stocks
AI chip leader Nvidia rose 4.8% in premarket trading, a day after $593 billion was wiped off its market value in the biggest single-session loss for any company. Other AI-linked stocks also regained some ground, with Oracle and Broadcom rising 3.5% and 4%, respectively.
Nvidia was founded in 1993 by Jensen Huang, Chris Malachowsky, and Curtis Priem.
Initially, the company focused on high-performance graphics processing units (GPUs).
In the late 1990s, Nvidia introduced its first GPU, the NV1.
The company's breakthrough came with the release of the GeForce 256 in 1999, which revolutionized the gaming industry.
Today, Nvidia is a leading manufacturer of GPUs and high-performance computing hardware.
Power Companies See Surge in Demand
Power companies, which are expected to see a surge in demand from energy-intensive data centers needed to develop AI technology, were broadly higher after tumbling a day earlier. Vistra and GE Vernova added 4.6% and 3%.
Company Earnings and Fed Decision in Focus
This week will see several key events that could impact the market. Company earnings are likely to take center stage, with Boeing, General Motors, and Lockheed Martin among those due to report quarterly results later in the day. The Federal Reserve is also expected to hold its lending rate steady in its first interest-rate decision of the year on Wednesday.
Tariffs and Inflation Concerns
U.S. President ‘Donald Trump‘ said late on Monday he plans to impose tariffs on imported computer chips, pharmaceuticals, and steel. Markets have been on edge about ‘Trump’s proposed tariffs’ on concerns they could exacerbate inflationary pressures and slow Fed rate cuts.
