Technology shares on Tuesday regained some ground lost with AI chip leader Nvidia closing up 8.9% as some investors shopped for bargains after the previous day's record-breaking wipeout sparked by a low-cost Chinese artificial intelligence model that could threaten the dominance of U.S. rivals.

On Monday, Nvidia lost about 17% or close to $593 billion in market value - a record one-day loss for any company, while shares of companies in semiconductor, power and infrastructure companies exposed to AI collectively shed more than $1 trillion.

Monday's selloff, which hammered many tech stocks across the globe, was prompted by the release of a free AI assistant from China's DeepSeek that the startup said needed less data at a fraction of the cost of incumbent services. DeepSeek drew worldwide attention, although skepticism lingered over its cost claims.

The broader technology sector came back with a 3.6% rally on Tuesday after falling 5.6% the day before. The Philadelphia semiconductor index rose 1.1% on Tuesday after falling 9.2% in the prior session, its deepest one-day percentage drop since March 2020.

"Yesterday was an initial reaction. Today investors are asking if anybody did any sort of homework and made sure DeepSeek is exactly what they say it is. Can we have more proof that they really built it for so much less?" said JJ Kinahan, president of tastytrade brokerage in Chicago.

Nvidia shares closed Tuesday's session at $128.99, still well below Friday's $142.62 close. Oracle finished up 3.6% after falling about 13.8% on Monday. And Marvell Technology shares rose 3.5% after falling 19% the previous day.

Shares of another chip heavyweight, Broadcom, gained 2.6% on Tuesday after dropping 17.4% on Monday.

Point72 Asset Management's founder, Steven Cohen, told a conference in Miami on Tuesday that "what happened with DeepSeek is actually bullish because it advances the move to artificial intelligence."

Nvidia's slide on Monday did little to blunt options traders' enthusiasm for the chipmaker, with traders quick to pile back into bullish Nvidia contracts as the stock recovered.

The selloff may make investors more cautious about valuations of AI-related stocks, according to Cody Acree, chip industry analyst at Benchmark Company.

But the emergence of cheaper AI models will not negate the need for more advanced chips according to Acree, who expects demand for high-performance AI as well as economically sensitive offerings such as DeepSeek.

Meanwhile, developers at leading U.S. AI firms were praising the DeepSeek AI models while also questioning the idea that their multibillion-dollar technology has been bested by a low-cost alternative.

Sam Altman, CEO of Microsoft-backed OpenAI, called the company an "impressive model," while U.S. President Donald Trump called it "a wakeup call for our industries".

"We will obviously deliver much better models and also it's legit invigorating to have a new competitor!" Altman, the head of the AI firm behind ChatGPT, said in a social media post.

DeepSeek's sudden burst onto the AI scene has upended the industry's perception that China was years behind its bigger U.S. rivals.

On the European side, the U.S.-traded shares of Dutch semiconductor company ASML fell almost 1% on Tuesday after losing almost 6% on Monday.

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The selloff is a reminder of how much investor capital is concentrated in such a small number of stocks that trade at a large premium to the rest of the market.

Before Monday's rout, Nvidia's shares were trading at nearly 60 times the value of its earnings, compared with 22 for the entire S&P 500, according to LSEG data.

The hype around AI has powered a huge flow of capital into equities, leading to an increase of around $10 trillion in the market value of "Magnificent Seven" companies since ChatGPT kicked off the AI boom in November 2022.

However, the slide of Nvidia's valuation multiple to its lowest in a year, at 26.76, attracted retail investors.

Data analytics firm Vanda Research showed that retail investors took advantage of the selloff in Nvidia to snap up a record net $562.2 million in the company's stock on Monday. Buy orders from retail orders outnumbered sell orders by 2:1 ratio on Monday, according to J.P.Morgan data.

Much of the tech index gains on Tuesday were thanks to market heavyweights such as Apple, which finished up 3.7% and was the Nasdaq's second-biggest boost, behind Nvidia.

Other big drivers of the index were Microsoft, which rose 2.9% on Tuesday more than wiping out losses from the last two sessions. Facebook parent Meta Platforms added 2.2% for its seventh straight day of gains despite Monday's volatility.

A number of Big Tech companies, including Apple and Microsoft, are due to report earnings later this week and investors will likely ask about capital spending and competition in AI.