Nvidia and other US tech stocks are holding steadier, a day after tumbling on doubts about whether the artificial-intelligence frenzy really needs all the dollars being poured into it.
The S&P 500 was 0.7 per cent higher in early afternoon trading. The Dow Jones was up 148 points, or 0.3 per cent and the Nasdaq composite was 1.7 per cent higher after sliding 3.1 per cent the day before. The Australian sharemarket is set to rise, with futures at 4.55am AEDT pointing to a gain of 21 points, or 0.3 per cent, at the open. The ASX dipped by 0.1 per cent on Tuesday.
Wall Street is stronger across the board, a day after AI-related tech stocks tumbled. Credit: AP
The spotlight remains 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 6.5 per cent after bouncing between gains and losses at the start of trading. The moves were much milder than its plunge of nearly 17 per cent from the day before, its worst drop since the 2020 COVID crash.
Other AI-related companies also flipped between initial gains and losses, including chip company Broadcom, which slipped 0.7 per cent. Constellation Energy lost an early gain to fall 4.1 per cent, giving back more of its recent rally built on expectations it will help supply the electricity that vast AI data centres would gobble up.
They are under threat after DeepSeek, a Chinese company, said it was able to develop a large language model that can perform as well as big US rivals but at fraction of the cost. That raises questions about whether all the spending expected for AI chips and electricity will need to happen.
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AI-related stocks have been Wall Street’s biggest stars in recent years, soaring on expectations for big continued spending. The gains, though, also created criticism that the 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 for data centres, electricity and chips, it could also boost other areas.
“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.”
