S&P500 and Nasdaq: AI Stocks Rally Midday as Nvidia and Cybersecurity Lead the Recovery

U.S. Stocks Rebound Mid-Session as Tech Recovers from Nvidia-Led AI Sell-Off

U.S. stocks were trading higher Tuesday afternoon, bouncing back from Monday’s steep sell-off sparked by fears of new competition in artificial intelligence. The Nasdaq Composite was up 1.5% by mid-session, partially recovering from its 3.5% drop on Monday. The S&P 500 gained 0.6%, while the Dow Jones Industrial Average rose 104 points, or 0.2%. Technology stocks led the mid-session rebound as investors revisited Monday’s sharp losses.

What’s Fueling the Tech Recovery?

Nvidia, the key driver of the AI rally, was up 4% by mid-session following Monday’s 17% plunge, the largest single-day loss in market value for a U.S. company. The sell-off had been driven by Chinese startup DeepSeek, which unveiled an open-source AI model claiming to operate at a fraction of competitors’ costs. Concerns over the profitability of Big Tech’s AI investments rattled the market.

Despite these fears, analysts maintain a favorable outlook on long-term demand for advanced AI chips. “DeepSeek introduces competition, but foundational AI systems will still drive the bulk of computing demand,” said Cody Acree, a Benchmark Company analyst.

Other tech stocks followed Nvidia higher, with Oracle rising 3% and Marvell Technology adding 2.7%. Cybersecurity names saw sharp gains, including CrowdStrike, which rose 8% to hit a new all-time high, while Zscaler climbed 6.7%.

Sector and Stock Highlights in Mid-Session Trading

The Technology Select Sector SPDR Fund (XLK) was up 1.5% midday, while the Philadelphia Semiconductor Index edged lower by 0.2%, signaling continued caution in chipmaker stocks. Outside of tech, Royal Caribbean surged 12.5% after issuing optimistic guidance, while General Motors fell 9.5% as investors weighed tariff risks despite better-than-expected earnings.

Boeing rose 4% as the company highlighted production stabilization, but Lockheed Martin lagged with an 8% drop after disappointing revenue and guidance.

On the macroeconomic front, December durable goods orders fell 2.2%, the fourth decline in five months. However, excluding transportation, orders showed a 0.3% increase, providing a mixed signal for economic activity.

What Should Traders Watch Next?

As mid-session trading unfolds, attention is focused on the earnings reports of major tech companies, including Microsoft, Meta Platforms, and Apple, which are due later this week. These results will offer key insights into capital spending on AI and other growth initiatives.

Additionally, the Federal Reserve’s interest rate decision on Wednesday will be pivotal. Traders widely expect rates to remain unchanged but are seeking clues on future policy direction. Nvidia’s midday rebound offers some relief, but traders remain cautious about evolving competition in AI.

More Information in our Economic Calendar.