Wall Street Stabilizes After Nvidia, Tech Stocks Plunge Over AI Concerns/ Newslooks/ WASHINGTON/ J. Manour/ Morning Edition/ Wall Street steadied Tuesday after a sharp sell-off in tech stocks, particularly Nvidia, sparked by concerns over AI spending. Nvidia shares rose 1.4% following Monday’s 17% plunge, while the S&P 500 and Nasdaq gained 0.3% and 0.8%, respectively. Investors remain cautious as U.S. consumer confidence dips and major earnings reports loom.
Stock Market Today: Quick Looks
- Tech Recovery: Nvidia climbed 1.4% after Monday’s steep drop, but AI-related stocks remain under scrutiny.
- Broader Market: The S&P 500 and Dow gained 0.3%, while the Nasdaq rebounded 0.8%.
- Royal Caribbean Soars: Shares jumped 9% after surpassing profit expectations and offering strong guidance.
- JetBlue Slides: The airline fell 23.7% due to rising non-fuel costs and disappointing revenue projections.
- Treasury Yields: The 10-year yield rose to 4.56% ahead of the Fed’s interest rate decision Wednesday.
Wall Street Stabilizes After Nvidia, Tech Stocks Plunge Over AI Concerns
Deep Look
After a volatile Monday driven by a sell-off in AI-related stocks, Wall Street showed signs of stabilization Tuesday. Nvidia, a key player in the artificial intelligence boom, rose 1.4%, easing after its worst single-day drop since the 2020 COVID crash. The S&P 500 climbed 0.3%, the Dow added 117 points (0.3%), and the Nasdaq rebounded 0.8%.
AI Stocks in the Spotlight
The recent turbulence stems from Chinese company DeepSeek’s announcement that its AI model could rival U.S. technology at a fraction of the cost. This revelation cast doubt on whether the massive investments anticipated for AI chips and infrastructure are sustainable.
- Nvidia: Despite Tuesday’s modest recovery, Nvidia remains under pressure after Monday’s 17% plunge. As a symbol of the AI boom, its chips power much of the industry’s progress.
- Broadcom: The chipmaker gained 0.5% after early fluctuations.
- Constellation Energy: The energy supplier fell 2.6%, continuing its slide as investors reassess its role in powering AI data centers.
The sell-off has reignited criticism that AI stocks, including Nvidia, had soared too high, too fast, fueled by speculative enthusiasm.
Corporate Earnings Shake Markets
Earnings reports drove significant movement outside the AI sector.
- Royal Caribbean: The cruise operator jumped 9% after exceeding profit expectations for Q4 2024. It reported strong demand for last-minute bookings and offered a positive forecast for Q1 2025.
- JetBlue Airways: JetBlue shares tumbled 23.7% as the airline projected rising non-fuel costs and weaker revenue growth.
Investors are also eyeing upcoming earnings reports from major players like Apple, Microsoft, Meta Platforms, and Tesla later this week, which could further influence market sentiment.
Bond Market and Economic Outlook
Treasury yields ticked higher Tuesday, with the 10-year yield rising to 4.56% from 4.53% on Monday. Yields have been climbing as traders temper expectations for Federal Reserve rate cuts this year, given the strength of the U.S. economy.
The Fed’s next interest rate decision is set for Wednesday. Most analysts expect the central bank to hold rates steady, marking the first meeting without a rate cut since September.
Meanwhile, the Conference Board reported a decline in U.S. consumer confidence for January, with the index dropping to 104.1 from 109.5 in December. Though the report made little impact on bond markets, economists are watching for signs that waning confidence could affect consumer spending, which drives two-thirds of U.S. economic activity.
Global Markets
Global stock markets showed mixed performances.
- Europe: Markets edged higher, shrugging off concerns from Monday’s U.S. tech sell-off.
- Asia: Japan’s Nikkei 225 fell 1.4%, led by a 5.2% drop in SoftBank shares.
- Fuji Media Holdings: The company rose 3% following a 10-hour news conference addressing a scandal involving a male star and an anchorwoman.
Key Takeaways
- AI Scrutiny: Investors are reassessing AI-related stocks after DeepSeek’s announcement cast doubts on U.S. dominance and spending expectations.
- Earnings Focus: Corporate earnings are driving sector-specific movements, with strong results boosting Royal Caribbean and weak projections dragging JetBlue.
- Fed Decision Looms: The market awaits clarity on interest rates as the Federal Reserve’s meeting concludes Wednesday.
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