NEW YORK (AP) — Nvidia and other U.S. tech stocks are holding steadier Tuesday, 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 0.4% higher in midday trading. The Dow Jones Industrial Average was up 54 points, or 0.1%, as of 11:45 a.m. Eastern time, and the Nasdaq composite was 1.1% higher after sliding 3.1 % the day before.
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 2.5% Tuesday after bouncing between gains and losses at the start of trading. The moves were much milder than its plunge of nearly 17% 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%. Constellation Energy lost an early gain to fall 4.1%, giving back more of its recent rally built on expectations it will help supply the electricity that vast AI data centers 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 U.S. 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.
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 centers, 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 U.S. 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 center structures, hardware and related investment.”
Outside of AI-related industries, stocks held up fairly well on Monday, and they were mixed Tuesday following a set of mixed profit reports.
Royal Caribbean steamed 12.1% higher after the cruise operator topped analysts’ profit expectations for the end of 2024. It benefited from stronger-than-expected demand from customers booking trips closer to the time of departure. The company also gave a profit forecast for the first three months of 2025 that toped analysts’ expectations.