NEW YORK — U.S. stock indexes experienced gains on Tuesday, primarily driven by a resurgence in technology shares, following a notable decline fueled by skepticism regarding the true necessity of the ongoing investment surge in artificial intelligence (AI).
The S&P 500 increased by 0.9%, effectively reclaiming more than half of the losses it incurred the previous day. The Dow Jones Industrial Average rose by 136 points, or 0.3%, while the Nasdaq composite surged by 2% after having slid by 3.1% the day prior.
Attention remained fixated on Nvidia, a leading chip manufacturer critical to the AI sector, with its stock price climbing 8.8% following a staggering 17% plunge on Monday—the company’s steepest decline since the COVID market crash of 2020. Other firms associated with AI also demonstrated stability, including Broadcom, which saw an increase of 2.6%. Constellation Energy rose 1.4%, recovering from a nearly 21% drop earlier in the week, as market expectations had initially positioned it as a key electricity supplier for large AI data centers.
However, revenue prospects linked to these projects faced new scrutiny after DeepSeek, a Chinese firm, announced the development of a competitive large language model that rivals major U.S. players at significantly reduced costs. This revelation introduces uncertainty regarding the anticipated expenditures on AI chips and energy resources.
In recent years, AI-related stocks have emerged as the standout performers on Wall Street, buoyed by forecasts of continued substantial investment. Yet, this trajectory has sparked debate about whether their valuations had escalated far too rapidly.
It remains unclear how DeepSeek’s advancements will affect the broader AI landscape. There could be a slowdown in expected growth for data centers, energy, and hardware spending, yet the innovation might also catalyze growth in other sectors.
“It’s possible that if AI usage becomes more cost-effective, businesses will accelerate their adoption, leading to increased investment in AI software,” commented James Egelhof, chief U.S. economist at BNP Paribas. “We believe this uptick in adoption might compensate for—if not overshadow—any reductions in spending related to data center infrastructure and hardware.”
In non-AI sectors, stock performance remained relatively stable on Monday, with a mixed trend observed on Tuesday following various earnings reports. Royal Caribbean saw an impressive 12% rise, following a report that surpassed analyst profit expectations for the end of 2024, driven by unexpectedly high demand for cruise bookings prior to departure dates. The company also provided a positive profit forecast for the first quarter of 2025, surpassing expectations.
Conversely, JetBlue Airways experienced a significant decline, plummeting 25.7%, in spite of reporting a smaller than anticipated loss in the latest quarter. The airline anticipates faster-than-expected increases in its operational costs, excluding fuel, at the beginning of 2025, compared to a pivotal revenue measure.
Profits from key Wall Street influencers, such as Apple, Meta Platforms, Microsoft, and Tesla, are set to be reported later this week.
The S&P 500 concluded the day up by 55.42 points at 6,067.70, while the Dow Jones Industrial Average increased by 136.77 to 44,850.35, and the Nasdaq composite surged by 391.75 to reach 19,733.59.
In the bond market, which had been guiding significant movements in shares before Monday’s fluctuations, Treasury yields remained stable. The 10-year Treasury yield held at 4.53%, consistent with its position late Monday. This stability follows a recent trend of increasing yields as traders adjusted their forecasts, anticipating fewer cuts to short-term interest rates from the Federal Reserve this year. Current economic indicators remain strong, while concerns linger regarding potential tariffs and policies from the administration that could elevate inflation.
A report on U.S. consumer confidence did not meet economists’ expectations, resulting in limited impact on the bond market. The market is now keenly awaiting the Federal Reserve’s announcement on interest rates, due on Wednesday. Analysts largely expect the Fed to maintain the federal funds rate, which would mark the first meeting since the Fed began providing stimulus in September without a rate cut.
Meanwhile, international stock markets showed varied results, with Europe and Asia reflecting mixed performances. Japan’s Nikkei 225 dropped by 1.4%, influenced by an ongoing downturn in SoftBank Group Corp. shares, which fell by 5.2%. In a different scenario, Fuji Media Holdings saw a 3% increase after an extensive 10-hour press conference led to the resignation of executives due to a scandal that has engulfed the company.
