US Semiconductor Stocks Recover as Investors Shift Focus on Big Tech Q4 Earnings
US semiconductor stocks are now showing signs of recovery after plummeting on January 27, Reuters has reported. European stocks, particularly those of chip manufacturers, surged while those of US semiconductor manufacturers registered marginal gains.
The global chip market recovery comes two days after China’s DeepSeek AI assistant triggered a dramatic stock sell off earlier this week.
Nvidia Under Pressure
But as chip stocks recovered in the US and Europe, Nvidia stocks remained on the downward trend. The AI chip maker experienced a 2.7% drop in its stock price, settling at $125.44 on January 29. Nvidia stocks rebounded marginally as the tech company registered an 8.9% rise on January 28.
However, Nvidia stock prices remained significantly lower compared to the January 7 high of $153.13. This drop weighed heavily on the Nasdaq, which is a reflection of the broader concerns that investors have around the company’s ability to maintain its dominance in the face of emerging competition.
“We remain of the view that the DeepSeek story is part of the evolution of the AI cycle with certain sectors (chipmakers and energy) likely to remain under pressure but rest of the sectors to shake off any Monday sell-off and move higher. Valuations are still stretched for certain tech companies and the coming earnings season will need to justify the current high valuations,” Mohit Kumar, Chief Economist at Jefferies said.
Nvidia’s market capitalization shrunk by close to $600 billion following the share price drop on January 27. This is the largest loss that any company has experienced in the stock market in history.
European Stock Jump
In Europe, stocks of leading tech companies increased in prices partly due to the 8% surge recorded by the Dutch semiconductor equipment manufacturer, ASML. On January 28, ASML shares rose following a surprise increase in new bookings.
The ASML stock rise triggered a 3.2% rise in the EU tech stock index. US chip manufacturers like Applied Materials, KLA Corp, and Lam Research recorded gains of between 0.9% and 2%. The Philadelphia chip index rose by 0.1%.
Focus on Quarterly Earnings
The emergence of the more cost-effective DeepSeek AI assistant as an alternative to incumbents like ChatGPT sent stocks tumbling on Monday, January 27. DeepSeek’s AI impact was felt globally as the stock sell-off wiped close to $1 trillion off the market valuation of top power, semiconductor, and equipment companies.
DeepSeek, which was unveiled as a free AI tool last week, overtook ChatGPT on the Apple App Store. Its performance and development cost appears to far outweigh those of US rivals. On January 28, the markets had settled as investors shifted their focus to the much awaited big tech quarterly earnings. Analysts say that investors will be monitoring quarterly results from Meta and Microsoft for spending on AI.
“This is the new line in the sand for the AI enablers and the mega cap growth cohort in general. Their ability to continue to drive positive absolute and relative returns will probably come down to investor confidence that ongoing positive revisions are forthcoming,” Citi’s US Equity Strategist Scott Chronert said.
Some experts remain skeptical over DeepSeek’s long term success particularly due to scanty information on the AI startup’s spending. OpenAI and Microsoft have launched an investigation to determine whether a group connected to DeepSeek may have used data from OpenAI improperly.
