AI-Exposed Power Stocks Slump as Chinese Advance Raises Concerns
Amid Monday's tech sell-off, AI-exposed power stocks suffered a significant setback as China's DeepSeek unveiled AI advancements that questioned US companies' AI spending and market dominance.
Nuclear Operators Hard-Hit
Constellation Energy (CEG), the leading US nuclear plant operator, experienced a sharp decline of 21%, while Vistra Corp (VST) dropped 28%, reaching a record low. GE Vernova (GEV), a power equipment provider, lost 21%. Oklo (OKLO), a nuclear power startup, saw a 25% plunge.
DeepSeek's Competitive AI Model
On January 20, DeepSeek released a groundbreaking AI model that rivaled the chatbots of OpenAI and other US tech giants. Notably, it utilized fewer AI chips, making it more cost-effective.
Big Tech's Power Consumption
In recent years, the insatiable energy demands of Big Tech's data centers have driven up power stock valuations. Goldman Sachs predicts a massive 160% surge in power demand by 2030. Last year, Constellation secured a deal with Microsoft to revive a nuclear plant in Pennsylvania. Meta recently issued a request for nuclear energy developers to support its AI initiatives.
Wall Street Reaction
Despite the market turmoil, Wall Street analysts expressed skepticism about the severity of the DeepSeek impact. Stacy Rasgon of Bernstein asserted that DeepSeek's models, while impressive, are not unprecedented or beyond the knowledge of other AI researchers.
Microsoft and Meta's Impact
Attention is now shifting towards Microsoft and Meta's upcoming earnings reports this week. Their outlooks could influence the broader AI market, including chipmaker Nvidia (NVDA), which reportedly generates over 40% of its revenue from these tech titans.