AI-Powered Power Stocks Take a Hit Amid DeepSeek Advancements
A stock market sell-off in technology companies has impacted AI-exposed power stocks, raising concerns about spending levels and market dominance.
On Monday, Constellation Energy (CEG) plunged 21%, Vistra Corp (VST) dropped 28%, and GE Vernova (GEV) fell 21%. Oklo (OKLO), a nuclear power startup, also declined by 25%.
The trigger was the release of a new AI model by DeepSeek, a Chinese startup, on January 20. The model is seen as competitive with chatbots from OpenAI and other US companies, but it requires fewer AI chips, making it more cost-effective.
Prior to the sell-off, power stocks had benefited from Big Tech's soaring data center energy demands. Goldman Sachs estimates a 160% increase in power demand by 2030. Last week, Constellation announced a deal with Microsoft for a nuclear power unit in Pennsylvania.
Wall Street analysts are skeptical about the long-term impact of DeepSeek's advancements. "DeepSeek's models are impressive, but they're not miraculous," said Bernstein's Stacy Rasgon.
Earnings reports from Microsoft (MSFT) and Meta (META) later this week could provide more clarity. These companies are major spenders on AI data center infrastructure, and their outlooks may affect AI chipmaker Nvidia (NVDA), which relies heavily on their business.
In summary, AI-powered power stocks have declined amid concerns raised by DeepSeek's advances. Analysts believe more information will be available after earnings reports from major AI infrastructure spenders.