NEW YORK (AP) — Rebounding tech stocks drove U.S. indexes higher a day after they tumbled on doubts about whether the artificial-intelligence frenzy really needs all the dollars being poured into it. The S&P 500 rose 0.9% Tuesday and clawed back more than half of its earlier drop. The Dow Jones Industrial Average added 0.3%, and the Nasdaq composite rallied 2%. The spotlight remained on Nvidia, whose chips are powering much of the move into AI. It climbed nearly 9%. Treasury yields held relatively steady ahead of an announcement coming Wednesday about what the Federal Reserve will do next with short-term interest rates. Traders expect it to hold steady.
THIS IS A BREAKING NEWS UPDATE. AP’s earlier story follows below.
NEW YORK (AP) — Rebounding tech stocks are driving U.S. indexes higher Tuesday, a day after they tumbled on doubts about whether the artificial-intelligence frenzy really needs all the dollars being poured into it.
The S&P 500 was 1% higher in late trading and clawing back nearly two-thirds of its earlier drop. The Dow Jones Industrial Average was up 152 points, or 0.3%, with a little less than an hour remaining in trading, and the Nasdaq composite was 2% higher after sliding 3.1 % the day before.
The spotlight remains on Nvidia, whose chips are powering much of the move into AI and whose stock has become a symbol of the surrounding frenzy. It rose 7.2% after plunging nearly 17% from the day before, its worst drop since the 2020 COVID crash.
Other AI-related companies also held steadier, including chip company Broadcom, which rose 2.6%. Constellation Energy edged down 0.1%, but that was much milder than its plummet of 20.8% on Monday. It had earlier rallied on expectations it will help supply the electricity that vast AI data centers would gobble up.
Such revenues are under threat after DeepSeek, a Chinese company, said it was able to develop a large language model that can perform as well as big U.S. rivals but at fraction of the cost. That raises questions about whether all the spending expected for AI chips and electricity will need to happen.
AI-related stocks have been Wall Street’s biggest stars in recent years, soaring on expectations for big continued spending. The gains, though, also created criticism that the stock prices had simply gone too high, too fast.
It's still uncertain how much DeepSeek's development will upend the AI industry. While it could mean less growth in spending for data centers, electricity and chips, it could also boost other areas.
“If AI becomes less expensive to use, we think businesses will adopt it more quickly, making a greater investment in AI software," according to James Egelhof, chief U.S. economist at BNP Paribas. "We think this acceleration in adoption could mean a rise in software investment that offsets – or even dwarfs – any deceleration in spending on data center structures, hardware and related investment.”
Outside of AI-related industries, stocks held up fairly well on Monday, and they were mixed Tuesday following a set of mixed profit reports.
Royal Caribbean steamed 12.5% higher after the cruise operator topped analysts’ profit expectations for the end of 2024. It benefited from stronger-than-expected demand from customers booking trips closer to the time of departure. The company also gave a profit forecast for the first three months of 2025 that topped analysts’ expectations.
JetBlue Airways, meanwhile, lost more than a quarter of its value, 27.3%, despite reporting a milder loss for the latest quarter than analysts expected. The company said it expects its costs outside of fuel to rise more quickly at the start of 2025 than a key underlying measure of its revenue.
Later this week will come profit reports from some of Wall Street’s most influential companies, including Apple, Meta Platforms, Microsoft and Tesla.
In the bond market, which had been driving much of Wall Street’s action before Monday’s upheaval, Treasury yields ticked higher.
The yield on the 10-year Treasury edged up to 4.54% from 4.53% late Monday. It’s been climbing in recent months as traders pared back expectations for how many cuts the Federal Reserve will deliver to short-term interest rates this year. The U.S. economy remains solid, and worries are high that tariffs and other policies potentially coming from President Donald Trump could put upward pressure on inflation.
A report showing confidence among U.S. consumers wasn't as strong as economists expected made relatively small waves in the bond market. The more anticipated event will come on Wednesday, when the Federal Reserve will announce its latest decision on interest rates.
The widespread expectation is that it will leave the federal funds rate alone. If that proves true, it would be the first meeting where the Fed did not cut rates to help the economy since it began doing so in September.
In stock markets abroad, indexes were mixed across Europe and Asia.
Japan’s Nikkei 225 lost 1.4% as SoftBank Group Corp. stock extended its losses, sinking 5.2%.
Fuji Media Holdings, rocked by a sex scandal, rose 3% after a marathon news conference by its top executives that lasted more than 10 hours, in which two of them resigned to take responsibility for the scandal. Fuji’s stock price has zigzagged in recent months amid Japanese magazine reports about “a problem” involving an anchorwoman and a Japanese male star. He has subsequently announced his retirement.
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AP Business Writers Yuri Kageyama and Matt Ott contributed.
Stan Choe, The Associated Press