US AI shares battered, bruised, and holding after yesterday's DeepSeek beating

US tech shares, rattled yesterday by the release of a supposedly more efficient AI model by Chinese outfit DeepSeek, appear to have staunched the bleeding, but not recovered. 

After losing enough market cap on January 29 to set a new record, Nvidia has pick up by a few percent, though not enough to erase the losses. The same goes for firms like Oracle, Marvell and Supermicro, all of which lost considerable cash and all of which recovered — slightly — overnight. Shares in the businesses dipped again when trading began in the US this morning, but were hovering near their low-points when markets closed yesterday.

Similar chaos hit tech stocks in Japan for a second day as concern over whether all those expensive chips are needed to develop cutting-edge AI: After all, if China can do it on the cheap in the face of sanctions keeping it from getting its hands on the latest and greatest AI chips, why is all that high-end Nvidia hardware necessary? 

Nvidia has explained the advancement as an “excellent AI advancement” in the realm of scaling resources to allow a model to think harder, known as test-time scaling that leveraged “widely available models and compute that is fully export control compliant,” the company told The Register in a statement. 

But don’t go thinking Nvidia is admitting defeat: It still thinks you’re going to need a lot of its chips. 

“Inference requires significant numbers of NVIDIA GPUs and high-performance networking,” the company said yesterday. “We now have three scaling laws: pre-training and post-training, which continue, and new test-time scaling.”

OpenAI chief Sam Altman also celebrated DeepSeek’s new R1 model as “impressive … particularly around what they’re able to deliver for the price.” Altman said it is “legit invigorating to have a new competitor,” but assured backers his company “will obviously deliver much better models” as it works to advance its AGI mission. 

“[We] believe more compute is more important now than ever before to succeed at our mission,” Altman said. In other words, American AI firms will still be buying Jensen’s chips as fast as he can assemble them. That confidence isn’t lost on US retail investors, who bought a record amount of Nvidia shares following the company’s losses yesterday. 

US President Trump also weighed in on the chip stock battering, saying yesterday that DeepSeek “should be a wake-up call” for US tech companies. 

David Sacks, Trump’s AI and crypto czar, took the opportunity to say DeepSeek proved his boss right in scrapping Biden’s AI safety executive order, which he said in a post on X “hamstrung American AI companies without asking whether China would do the same.” 

“DeepSeek R1 shows that the AI race will be very competitive and that President Trump was right to rescind the Biden EO,” Sacks said. “I’m confident in the US but we can’t be complacent.” ®