AI-Exposed Power Stocks Surge as Investors Eye Uncertain Energy Demand
Amidst a tech rout sparked by a new AI model from DeepSeek, AI-dependent power stocks rebounded on Tuesday.
Constellation Energy (CEG), the leading US nuclear plant operator, rose after a 21% plunge the previous day. Electricity generator Vistra Corp (VST) soared by approximately 7% following a record 28% decline. GE Vernova (GEV), a power equipment manufacturer, gained over 6% after falling by 21%.
Concerns arose from DeepSeek's release of a competitive and cost-effective AI model in late January. The surge in popularity and praise from industry experts has unsettled investors who invested in power stocks on the assumption that US hyperscalers would invest heavily in AI data center infrastructure, driving energy demand.
Power stocks experienced a significant rally in 2024 and early 2025, with Constellation, Vistra, and GE Vernova reaching record highs last week. However, questions now linger about the sustainability of long-term energy demand.
Paul Zimbardo, managing director at Jefferies, notes the medium-term stability of data center deployment but raises concerns about the latter part of the decade. "Will the trend accelerate in the future, or will we see moderation of demand growth?" he asks.
Wall Street analysts acknowledge the speculative nature of AI energy consumption estimates. Pavel Molchanov of Raymond James emphasizes the nascent technology and the uncertainty surrounding its ultimate energy needs. "It's going to be a lot, but it's still a question of how much."
Despite the uncertainty, increased energy demand is already evident. US electricity consumption jumped by 2% in 2024. The Energy Information Administration projects continued growth at this rate in 2025 and 2026.
Data center deployments coincide with infrastructure upgrades by utilities. "It's a marathon, not a sprint. Building data centers and power plants takes time," says Molchanov.