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Wall Street technology stocks rose on Tuesday following a global rout sparked by Chinese start-up DeepSeek’s advances in artificial intelligence.

The Nasdaq Composite index was up 1.2 per cent in early afternoon in New York after Monday’s 3.1 per cent decline. Nvidia rose 3 per cent following a historic 17 per cent fall that wiped $589bn off its market value.

This previous day’s losses had come as Wall Street and Silicon Valley panicked over a perceived threat from DeepSeek to the continued dominance of the US in AI.

But relative calm returned to markets on Tuesday with the benchmark S&P 500 up 0.5 per cent.

“The sheer magnitude of the moves in stocks like Nvidia, Broadcom and Marvell [on Monday] strike us as overdone and may generally look like a buying opportunity in hindsight once the dust settles,” said Timothy Arcuri, an analyst at UBS.

The Chinese company’s model, which achieved a quality of output similar to US chatbots but with apparently far less capital expenditure, has called into question the need to invest hundreds of billions of dollars in underlying AI infrastructure.

“Investors have been reminded that even technology stocks need to have a risk premium,” said Guy Miller, chief market strategist at insurer Zurich. “[The tech rout has been] a healthy reminder that nothing in markets, or in technological development, is a straight line.”

Markets in Europe and Asia steadied, with the Stoxx Europe 600 index closing up 0.4 per cent.

Japan’s tech-heavy Nikkei 225 closed down 1.4 per cent as its chipmaking companies continued their decline. The broader Topix, which has lower weightings for Japan’s tech exporters, was flat.

Tokyo-listed shares in SoftBank lost 5.2 per cent, following Monday’s 10 per cent drop in shares of Arm Holdings — the US-listed chip design company in which the Japanese group holds an 88 per cent stake.

In currency markets, the US dollar strengthened 0.6 per cent against a basket of currencies, including the Japanese yen and the pound, after US President Donald Trump said he wanted “much, much bigger” tariffs than the 2.5 per cent that US Treasury secretary Scott Bessent had been pushing for, according to people familiar with the proposal.

DeepSeek’s promise of a much lower-cost AI model has raised the question of whether last week’s unveiling of the Stargate joint venture, involving SoftBank, Oracle and OpenAI in a $100bn data centre investment, “marked the peak of the AI capex boom”, said Chris Wood, strategist at Jefferies.

The market has moved to price in a smaller market share for AI incumbents and a “dramatically lower cost” for developing the technology, said Shaniel Ramjee, co-head of multi-asset at Pictet Asset Management. “While the incumbents looked to be building ever greater moats around their capability . . . this new development challenges that notion.”

In Hong Kong, shares in Chinese tech companies recorded gains, although chipmaker SMIC closed down 0.4 per cent. The Hang Seng index closed up 0.1 per cent, led higher by mainland Chinese tech companies including Tencent and Baidu, which closed up 1.4 and 3.6 per cent respectively.