Nvidia and other major U.S. tech stocks were jittery on Tuesday, fluctuating between gains and losses after a sharp drop the day before, fueled by concerns over whether the AI boom justifies the massive investments pouring in. Nvidia, whose chips power much of the AI boom and have become emblematic of the frenzy, was in focus again. The stock dipped 0.8% after initially gaining, following a nearly 17% plunge on Monday—its worst drop since the 2020 COVID crash.
Other AI-linked stocks also saw volatility, flipping from early gains to losses. Broadcom, a chipmaker, fell 0.8%, while Constellation Energy, which has surged on expectations of supporting the massive energy needs of AI data centers, dropped 3.7%.
The uncertainty comes after DeepSeek, a Chinese company, announced it had developed a large language model that rivals U.S. offerings at a fraction of the cost. This development has raised concerns about the future demand for AI chips and energy, casting doubt on whether the massive investments are truly necessary.
As of 9:40 am Eastern time, the Dow Jones Industrial Average was up 64 points, or 0.2%, while the Nasdaq Composite was down 0.1%, following a 3.1% drop on Monday.
Wall Street’s AI boom
AI-related stocks have been Wall Street’s biggest stars in recent years, soaring on expectations for big continued spending on what’s hoped to propel the next reshaping of the global economy. The huge gains, though, also created criticism that the stock prices had simply gone too high, too fast.
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 7.6% 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.
JetBlue Airways, meanwhile, dropped 19.9% despite reporting a milder loss for the latest quarter than analysts expected. The company said it expects trends for its costs outside of fuel to rise more quickly at the start of 2025 than a key underlying measure of its revenue.
Later this week will come profit reports from some of Wall Street’s most influential companies, including Apple, Meta Platforms, Microsoft and Tesla.
In the bond market, which had been driving much of Wall Street’s action before Monday’s upheaval caused by DeepSeek, Treasury yields ticked higher.
The yield on the 10-year Treasury rose to 4.55% from 4.53% late Monday. It’s been climbing in recent months as traders have pared back their expectations for how many cuts the Federal Reserve will deliver to short-term interest rates this year. The US economy remains solid, and worries are high that tariffs and other policies potentially coming from President Donald Trump could put upward pressure on inflation.
Fed to hold rates steady?
The Federal Reserve will announce its latest interest rate decision on Wednesday, with most expecting it to keep the federal funds rate unchanged. If confirmed, this would be the first meeting since September where the Fed chose not to lower rates to support the economy.
In stock markets abroad, indexes were modestly higher in Europe after finishing mixed in Asia.
Japan’s Nikkei 225 lost 1.4% as SoftBank Group Corp stock extended its losses, sinking 5.2%.
Fuji Media Holdings, rocked by a sex scandal, rose 3% after a marathon news conference by its top executives that lasted more than 10 hours, in which two of them resigned to take responsibility for the scandal. Fuji’s stock price has zigzagged in recent months amid Japanese magazine reports about “a problem” involving an anchorwoman and a Japanese male star. He has subsequently announced his retirement.
(With inputs from Associated Press)