Nvidia Leads AI Stock Rebound After Shaking Off Trump Tariff Fears

Nvidia (NASDAQ: NVDA) stock rebounded on Tuesday, leading the AI sector higher after a selloff triggered by Chinese startup DeepSeek's launch of a cutting-edge model at a fraction of the cost of its U.S. rivals. The company's shares rose 1.7% Tuesday after tumbling more than 8% yesterday and trading as much as 4% lower in premarket trading today. AI server maker super micro computer (SMCI), which tumbled 13% yesterday, also rebounded, climbing 8.5%. The two led a broad AI rally, with Wall Street darling palantir (PLTR) and vistra (VST) also advancing.



The Chinese company's launch of its low-cost R1 model using less advanced chips cast doubt about the high valuation of a swath of stocks, from chipmakers and hyperscalers to power providers, that have powered the AI boom. nvidia called DeepSeek's AI model an "excellent AI advancement" and "a perfect example of Test Time Scaling." However, the revelation initially sparked concern that U.S. cloud providers could rein in their spending on chips and servers to focus on creating more efficient AI, but big tech companies have since stood by their plans to invest hundreds of billions in AI infrastructure.



Despite the rebound, analysts caution that Nvidia's stock remains expensive, trading at 50 times earnings, 28 times sales, and 55 times the free cash flow it produces. While the chipmaker will still be a winning investment, investors should wait for a better price before buying in. The DeepSeek moment is something that has occurred time and again in the tech sector, and the AI sector is no exception. As PC computing power became commoditized and pricing plummeted, it allowed for it to proliferate and expand as a whole.

In conclusion, Nvidia's stock rebounded on Tuesday, leading the AI sector higher after a selloff triggered by Chinese startup DeepSeek's launch of a cutting-edge model at a fraction of the cost of its U.S. rivals. While the stock remains expensive, analysts caution that investors should wait for a better price before buying in. The AI sector has seen similar commoditization in the past, and Nvidia's stock price may continue to fluctuate as the market digests the implications of DeepSeek's achievement.