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Nvidia ( NVDA ) shares tumbled nearly 6% in intraday trading Wednesday, dashing hopes for a quick recovery from losses earlier in the week amid concerns about competitiveness of American AI firms and their spending on artificial intelligence .

The AI chipmaker's stock led losses in the Dow Jones Industrial Average , and was among the top decliners on the S&P 500 and Nasdaq Wednesday. Shares of Broadcom ( AVGO ), Palantir ( PLTR ), and several other AI darlings over the past year also were lower.

The surging popularity of an app from Chinese startup DeepSeek , which runs on an AI model it claimed can perform on par with American rivals at a fraction of the cost, had sent Nvidia and a slew of other U.S. tech stocks into a tailspin Monday. Despite a brief rebound in Tuesday's session , the tech sector fell back into the red Wednesday as Chinese tech giant Alibaba ( BABA ) rolled out a new AI model it says can outperform models from DeepSeek, OpenAI, and Meta Platforms ( META ).

The rapid rise of lower-cost models from Chinese companies that can compete with those from leading American firms has spurred a reckoning on Wall Street, with earnings from Meta and Microsoft ( MSFT ) likely to be in the spotlight later tonight as both firms face pressure to prove their AI investments can yield results that justify the costs.

Analysts have so far remained mostly bullish on their prospects, with Morgan Stanley analysts telling clients that advances by DeekSeek could prove "positive" for Microsoft and Meta, suggesting Meta could implement them and that Microsoft's Azure platform would benefit from a proliferation of AI models and consumer applications.

Bank of America analysts told clients in a note Wednesday they see this as "AI's Sputnik moment," suggesting competition could push U.S. hyperscalers like Microsoft, Amazon ( AMZN ), and Alphabet ( GOOGL ) to spend even more on AI, to the benefit of Nvidia, Broadcom, and other AI chipmakers.