Nasdaq Jumps 2% After Nvidia, Other Tech Stocks Bounce Back From DeepSeek Hit: Greed Index Remains In 'Fear' Zone

The Nasdaq Composite Index (^IXIC) surged 2% on Tuesday, January 29, as tech stocks, including Nvidia (NVDA), rebounded from the previous day's sell-off triggered by the emergence of DeepSeek, a Chinese AI startup. The broader market sentiment, however, remains cautious, with the Greed Index lingering in the 'fear' zone.

Nvidia shares rose more than 8% on Tuesday, following a record one-day loss of nearly $600 billion in market value on Monday, January 28. The chipmaker's stock price surged to $126.50, still well below Friday's close of $142.62. Other tech stocks, such as Oracle (ORCL) and Marvell Technology (MRVL), also recovered, adding 3.3% and 2.7% respectively.

The rebound in tech stocks can be attributed to several factors, including retail investor buying, market overshoot, investor confidence in AI, recovery in the semiconductor index, analyst optimism, and the gains of Oracle and Marvell Technology. Retail investors snapped up Nvidia shares at a record level, buying the dip as the stock plummeted on Monday. This increased demand from retail investors helped drive the stock's rebound. The initial sell-off was seen as an overreaction by some investors, leading to a bounce-back as the market corrected itself. The steep decline in Nvidia's stock price on Monday was the biggest single-day market cap decline on record, indicating a potential overshoot.

Investor confidence in AI remains strong, despite the emergence of DeepSeek's cheaper, open-source AI model. Many investors remain optimistic about the long-term potential of AI and the companies driving its development. The recovery in the Philadelphia Semiconductor Index, which includes Nvidia, also contributed to the broader tech stock rebound. The index rose after falling 9.2% on Monday, its deepest one-day percentage drop since March 2020.

Analysts remain optimistic about Nvidia's prospects, despite the DeepSeek news. Cody Acree, a chip industry analyst at Benchmark Company, stated that the emergence of cheaper AI models would not negate the need for more advanced chips, which Nvidia specializes in producing. Oracle and Marvell Technology's gains also added to the broader tech stock recovery.

However, the broader market sentiment remains cautious, with the Greed Index lingering in the 'fear' zone. The Greed Index is a measure of market sentiment, with values below 20 indicating fear, between 20 and 40 indicating neutral, between 40 and 60 indicating greed, and above 60 indicating extreme greed. As of the time of this writing, the Greed Index is at 11, indicating a high level of fear among investors.

This fear is likely driven by several factors, including the recent emergence of DeepSeek, the potential impact of cheaper, open-source AI models on the market capitalization of U.S. tech giants, and broader market uncertainty and volatility. Investors are also likely worried about the potential impact of DeepSeek on the market capitalization of U.S. tech giants like Nvidia, which saw a record one-day loss of nearly $600 billion in market value on Monday, January 28, following the news of DeepSeek's achievements.

In conclusion, the Nasdaq Composite Index surged 2% on Tuesday, January 29, as tech stocks, including Nvidia, rebounded from the previous day's sell-off triggered by the emergence of DeepSeek, a Chinese AI startup. The rebound in tech stocks can be attributed to several factors, including retail investor buying, market overshoot, investor confidence in AI, recovery in the semiconductor index, analyst optimism, and the gains of Oracle and Marvell Technology. However, the broader market sentiment remains cautious, with the Greed Index lingering in the 'fear' zone, driven by concerns about the potential impact of cheaper, open-source AI models on the market capitalization of U.S. tech giants and broader market uncertainty and volatility.