US stocks were up on Tuesday, with key indexes rallying on the strength of AI-related tech giants. After the previous day's losses, investors rushed to take advantage of bargain-basement stocks.
The Nasdaq tech index soared 2%, while Nvidia, the leader in artificial intelligence chips, staged a rapid recovery, gaining 8.9%. That came a day after a 17% plunge that wiped a whopping $593 billion off its market value — the largest loss of any public company in a single trading session.
The S&P 500 tech sector (.SPLRCT) rose 3.6%, its biggest daily gain since July last year. Meanwhile, the semiconductor industry (.SOX) rose 1.1%, reflecting a rebound in the strategically important segment.
Apple shares gained 3.7%, with market participants focused on upcoming earnings reports from giants Apple (AAPL.O) and Microsoft (MSFT.O), which are expected to release their financial results for the latest quarter. These data could have a significant impact on the future dynamics of the market.
The collapse of the tech sector yesterday was caused by news from China: a local startup DeepSeek presented artificial intelligence models, claiming that their performance is comparable or even superior to solutions from leading American companies, but at a fraction of the cost. This became an alarming signal for investors concerned about increasing competition from China.
On Tuesday, US stock indices showed growth after a recent correction related to volatility in the tech sector. Investors willingly returned to buying, and the rapid rise in Nvidia shares was a clear confirmation of this trend.
"We're seeing a natural rebound, which is typical when the news is vague and more indicative of possible future changes than specific events," said Rick Meckler, a partner at Cherry Lane Investments in New Vernon, New Jersey.
The tech sector, especially the artificial intelligence segment, has long been at risk of a small correction, he said. "The news about Chinese startup DeepSeek was just a trigger, but today we see bargain-hunting investors returning to the market. Many are not paying much attention to this news, since there is very little information about DeepSeek," Meckler added.
Stock markets responded to the change in sentiment with significant gains. The Dow Jones Industrial Average (.DJI) added 136.77 points, or +0.31%, to 44,850.35. The S&P 500 (.SPX) rose 55.42 points, or 0.92%, to 6,067.70, while the tech-heavy Nasdaq Composite (.IXIC) jumped 391.75 points, or 2.03%, to 19,733.59.
Nvidia's forward price-to-earnings ratio, a key metric for the company's valuation, has fallen to its lowest since December 2023. However, that hasn't stopped the company from posting a sharp rebound after its recent decline, which was triggered by a massive sell-off.
Despite short-term fluctuations, Nvidia and the broader U.S. stock market have been buoyed by the AI craze over the past two years. Investor optimism about the future of the AI industry remains high, fueling demand for the sector's top players.
In addition to the tech boom, the positive dynamics in the market were supported by strong corporate reports. For example, shares of cruise operator Royal Caribbean (RCL.N) soared by 12% after the company released a forecast for full-year profit that significantly exceeded analysts' expectations.
At the height of the quarterly earnings season, market participants are closely watching the financial results of the largest companies to understand how sustainable the current growth wave is.
The US stock market continues to show mixed movements: against the backdrop of strong growth in the technology sector, investors turned their attention to corporate reports of industrial giants.
Shares of aircraft manufacturer Boeing (BA.N) rose by 1.5%, despite the publication of financial results, according to which the company recorded the largest annual loss since 2020. The upward dynamics are likely due to investor optimism about the future of air travel and the expected recovery in demand for aircraft.
The session was much less positive for General Motors (GM.N). The largest American automaker presented a report that did not meet market expectations. Against this background, the company's shares fell by 8.9%. Adding to the pressure are concerns about tariffs that could impact supply chains and raise production costs.
Former US President Donald Trump has added to the jitters in his speech on Monday evening. In his speech on Monday evening, he announced plans to impose tariffs on imported semiconductors, pharmaceuticals and steel. If implemented, these measures could significantly change the competitive landscape for US companies that rely on supplies from abroad.
Another key factor that traders and investors are paying attention to is the upcoming Federal Reserve meeting. On Wednesday, the Fed is likely to leave its key rate unchanged, which will be its first decision of the new year. However, analysts will be closely studying the regulator's rhetoric for hints about further steps in the area of monetary policy.
On the NYSE, decliners outnumbered gainers by 1.13 to 1. However, 165 new highs and 46 new lows were recorded, indicating that some growth points remained.
On the Nasdaq, the balance was even thinner: 2,188 stocks showed growth, while 2,216 declined, forming a ratio of 1.01 to 1 in favor of sellers.
Market activity remained below normal levels. On the day, 13.87 billion transactions were made on US exchanges, which is below the average of 15.5 billion shares over the past 20 trading days.
After a record plunge in Nvidia (NVDA.O) shares, investors looking for quick profits have begun to actively buy up leveraged exchange-traded funds, counting on a rapid recovery in the market value of the leader in the field of artificial intelligence.
The largest funds aimed at accelerated growth of Nvidia have become a magnet for short-term traders seeking to take advantage of the volatility of the chipmaker's shares. Asset managers on Tuesday confirmed massive purchases of leveraged exchange-traded funds that allow them to earn double the daily return on the dynamics of Nvidia shares.
The company's shares suffered an unprecedented one-day drop in market capitalization on Monday, which was a reaction to the news that Chinese startup DeepSeek presented a new artificial intelligence model that could potentially compete with Nvidia's advanced developments.
One of the most popular vehicles for investors has been the GraniteShares 2x Long NVDA Daily ETF (NVDL.O), which offers double the return on Nvidia growth.
"We've seen about $1 billion in inflows into our long fund," said GraniteShares CEO Will Rhind.
Despite the impressive inflows, they haven't fully offset the impact of the sell-off. The fund's assets have fallen to about $4.3 billion, down from $6 billion at its peak last year.
Each of the four Nvidia-focused 2x ETFs posted significant losses on Monday, down between 33% and 34%, according to LSEG.
However, traders are still pouring money into these high-risk vehicles. For example, the Direxion Daily NVDA Bull 2x Shares ETF (NVDU.O), with assets valued at $435 million, recorded an inflow of capital of $61.4 million.
Interestingly, even its inverse analogue, a fund betting on the decline of Nvidia, also attracted about $3 million in investments, which indicates a split in opinions among market participants.
Despite the recent collapse, Nvidia remains one of the key drivers of stock market growth. Optimism around artificial intelligence continues to fuel demand for the company's shares, and short-term traders are looking to take advantage of high price fluctuations.
The coming weeks will show whether Nvidia will recover quickly or whether the correction will drag on. However, one thing is already clear: bets on sharp movements remain high, and the market is full of expectations.
The smallest of the four leveraged ETFs, the Leverage Shares 2x Long NVDA Daily ETF (NVDG.O), which manages $3 million in assets, did not immediately provide exact inflow data. But the trading dynamics speak for themselves.
According to Paul Marino, chief revenue officer at Themes ETFs, who oversees the U.S. unit of Leverage Shares, trading volume in the instrument was six times higher than the average on Monday.
Marino notes that such a rapid increase in activity in the Nvidia leveraged funds indicates the large-scale involvement of speculative traders looking to profit from market volatility.
"The volume tells us how many players in the market are betting on Nvidia," he explained.
The fund ended the trading session positive on Monday, and continued to gain on Tuesday. This confirms that a significant portion of investors do not view the recent collapse as a signal to exit, but, on the contrary, perceive it as an opportunity to enter the market at reduced levels.
The market is still closely monitoring the developments around the leader in the field of artificial intelligence. After a record drop in capitalization, Nvidia continues to be an object of active trading, and leveraged funds are becoming a tool for the riskiest strategies.
Whether the company will be able to quickly restore its lost positions or volatility will persist is an open question. However, one thing is for sure: interest in Nvidia is not weakening, and short-term traders are ready to take risks, hoping for a sudden reversal of the trend.
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