AI-Exposed Power Stocks Plunge Amidst Advancements from Chinese Start-up
The sell-off in technology stocks Monday sparked a decline in AI-exposed power stocks, as advancements by Chinese start-up DeepSeek raised concerns about AI spending at US companies.
Constellation Energy (CEG), the leading nuclear plant operator in the US, plummeted 21%. Vistra Corp (VST), an electricity generator, sank a record 28%. GE Vernova (GEV), a power equipment manufacturer and servicer, declined 21%. Even nuclear power startup Oklo (OKLO) tanked 25%.
DeepSeek's release of a competitive AI model on January 20 ignited questions about the future of AI spending at major US tech companies. The model, which requires fewer AI chips than those of its rivals, presented a more cost-effective solution.
Big Tech's Impact on Power Demand
The insatiable energy demands of Big Tech's data centers have been a major driver of power stock growth in recent years. Goldman Sachs estimates that power demand will soar by 160% by 2030. Last year, Constellation announced a nuclear power deal with Microsoft to revive a unit at Three Mile Island. Meta released a request for proposals from nuclear energy developers in December to address its AI needs.
Market Reaction and Analyst Outlook
Wall Street analysts have downplayed the market's overreaction. Stacy Rasgon, Bernstein's managing director and senior analyst, believes that DeepSeek's advances are not a "doomsday" for AI infrastructure. He emphasizes that while DeepSeek's models are impressive, they do not possess a miraculous edge over other AI research labs.
Analysts anticipate greater clarity from earnings reports later this week from Meta and Microsoft, major spenders on AI data center infrastructure. Their outlooks will likely have an impact on AI chipmaker Nvidia (NVDA), which derives a significant portion of its revenue from these companies.