The sell-off that hit the biggest technology companies in the United States at the start of the week abated on Tuesday, with some of the hardest-hit shares finding their feet.
Shares in tech companies, especially those propelled by the profit-making potential of artificial intelligence, fell on Monday after the Chinese A.I. company DeepSeek said it could match the capabilities of the most advanced chatbots using far fewer expensive computer chips.
Markets in the United States stumbled as trading opened on Tuesday before beginning to recover some of Monday’s losses. The S&P 500 rose 0.9 percent, while the tech-heavy Nasdaq Composite index rallied 2 percent.
Alphabet and Microsoft both rose, while Oracle moved more than 3 percent higher. Shares of the Silicon Valley chip company Nvidia, which lost roughly $600 billion of its market value on Monday, rose almost 8 percent, recouping roughly $200 billion of its previous valuation.
Nvidia is the standard-bearer of a group of tech giants known as the Magnificent Seven. Those stocks have led the entire market higher in recent years, with the S&P 500 posting back-to-back annual gains of more than 20 percent for the first time since the 1990s. Those lofty returns have generated views that the market has become overly dependent on the performance of just a few high-flying companies.
The tech sector of the S&P 500 led the index again on Tuesday, rising 3.6 percent, dragging the index higher despite eight of the 10 other sectors of the index moving lower. The tech sector, however, still remains the only one to post negative returns for the year so far, with all others — from utilities to communication services — rising over the past month.
“While vulnerabilities were expected this year, developments like DeepSeek highlight the need for diversification beyond the Mag 7,” said Seema Shah, chief global strategist at Principal Asset Management. She said that the idea that U.S. stocks would continue an unabated rise “is now facing uncertainty,” noting that investors were contending with stubborn inflation and the prospect of hefty tariffs that could weigh on spending and economic growth.
Meta and Microsoft will report quarterly earnings on Wednesday, kicking off the latest round of financial results from big technology companies. Analysts are expected to press A.I. leaders on their ability to maintain lofty growth expectations in light of new competition. Apple also reports earnings this week, while Nvidia is not scheduled to deliver its financial results until the end of February.
Overnight, the sell-off in U.S. markets rippled across the globe. Japan’s tech-heavy Nikkei 225 fell 1.4 percent on Tuesday with Softbank, the Japanese investment firm with major A.I. holdings, dropping about 5 percent. Many financial markets in Asia, including those in mainland China and Taiwan, are closed this week for Lunar New Year.
Markets in Europe bounced, with the pan-European Stoxx 600 index gaining 0.5 percent. ASML, a Dutch company that makes the machines that build the most cutting-edge semiconductors, fell a further 0.7 percent, after a steep fall on Monday.
Treasuries barely changed on Tuesday, having rallied on Monday as investors sought out the safety of government debt amid the stock sell-off. The Federal Reserve is expected to leave interest rates unchanged at its meeting this week, with investors instead closely watching comments from Jerome H. Powell, the chair of the Fed, after the central bank’s interest rate decision is announced on Wednesday afternoon.
With the latest inflation readings moderating and the labor market holding strong, “we believe that Chair Powell will do everything he can to make this week’s post-F.O.M.C. press conference as low-profile as possible,” Lauren Goodwin, an economist at New York Life Investments, said referring to the central bank’s meeting.
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