Violence is not okay.
If you watch it again, he laughs at the joke, then looks at her, sees her not finding it funny. He obviously knows her well enough that he needs to do something, so he changes from laughing to being insulted and had to react, resorting to violence.
Had he just said "don't insult my wife", he would have come off better. Now instead of being remembered for winning an Oscar, we remember him for this incident.
In case anyone doesn't know, Jada Smith is open about her illness, she revealed it a couple years ago, even made a post in the lines of "they can joke about it now" after shaving her head. So Chris Rock made a joke, which btw, he didn't mention her illness, only her likeness to GI Jane.
So the whole thing is strange that, they know they will be at the end of some jokes throughout the night, the Oscars do that, every year, they know this going in. This isn't a random insult down the pub, this is a live televised event in front of millions. Also, from memory this is not really a low bar for jokes Gervias has said much worse, not about hair loss in women. they made jokes Roman Polanski in the past. There was also a rehearsal, these jokes have been proofread by people.