AI-Powered Stock Slump: DeepSeek Prompts Market Reassessment
AI-reliant energy stocks plunged on Monday amid concerns sparked by Chinese startup DeepSeek's advancements in AI. The sell-off mirrors a broader decline in tech stocks.
Constellation Energy (CEG), the leading U.S. nuclear plant operator, dropped by 21%, while power generator Vistra Corp (VST) experienced a record loss of 28%. GE Vernova (GEV), a power equipment manufacturer and servicer, declined by 21%. Even nuclear startup Oklo (OKLO) plunged by 25%.
DeepSeek's release of a competitive AI model on January 20 has raised questions about US companies' AI spending and market dominance. The model reportedly requires fewer AI chips, making it more cost-effective.
These developments have reversed the bullish trend in power stocks, which surged in recent years due to Big Tech's data center energy requirements.
However, Wall Street analysts have expressed skepticism about the market's extreme reaction. Bernstein's Stacy Rasgon emphasizes that DeepSeek's innovations are impressive but not groundbreaking.
"I don't think DeepSeek is doomsday for AI infrastructure," Rasgon told Yahoo Finance.
Earnings reports from AI infrastructure spenders Microsoft (MSFT) and Meta (META) later this week could provide further market clarity. Their outlooks may also impact AI chipmaker Nvidia (NVDA), which reportedly derives a significant portion of its revenue from these tech giants.