AI-Exposed Power Stocks Rebound Amidst DeepSeek AI Model Release
In the aftermath of a sell-off triggered by the launch of DeepSeek's competitive AI model, AI-exposed power stocks witnessed a resurgence on Tuesday.
Constellation Energy (CEG), the leading nuclear plant operator in the US, surged over 1% after a 21% decline the previous day. Vistra Corp (VST), an electricity and power generator, rallied 9% after plummeting a record 28%. Power equipment provider GE Vernova (GEV) recovered more than 7% following a 21% drop.
DeepSeek's AI model has gained significant traction, becoming a top download on US iPhones and receiving accolades from industry leaders. However, its emergence has raised concerns among investors who had anticipated a surge in energy demand as US hyperscalers invested in data centers for AI applications.
Power stocks had experienced a strong rally prior to the DeepSeek release, with Constellation, Vistra, and GE Vernova reaching record highs last week. Analysts now question whether long-term energy demand will meet expectations.
Paul Zimbardo of Jefferies acknowledges the potential for data center deployment to continue in the medium term but expresses uncertainty about its trajectory in the later decade and beyond.
Wall Street analysts recognize the speculative nature of estimating energy consumption from AI. Nonetheless, they believe it will significantly increase electricity demand. Government data shows a 2% jump in US electricity consumption in 2024 after a prolonged period of steady demand.
Data center expansion is occurring alongside infrastructure enhancements by utility companies. Molchanov of Raymond James emphasizes that these developments are long-term processes, requiring years to complete.