Power Stocks Plunge amid AI Market Shakeup
AI-exposed power stocks plummeted Monday as advances by Chinese AI startup DeepSeek raised concerns about AI spending levels and market dominance by US companies.
Constellation Energy (CEG), the largest nuclear plant operator in the US, fell 17% while Vistra Corp (VST) dropped 21%. GE Vernova (GEV) declined 17%. Oklo (OKLO), a nuclear power startup, tanked 21%.
DeepSeek's new AI model, released on January 20th, rivals chatbots from OpenAI and other US tech giants. It also requires fewer AI chips, making it more cost-effective.
Previously, strong energy demand from Big Tech's data centers fueled a surge in power stocks. Goldman Sachs estimates power demand will increase 160% by 2030.
In 2023, Constellation announced a nuclear power deal with Microsoft, while Meta issued a request for proposals for nuclear energy developers. Constellation, Vistra, and GE Vernova hit record highs last week following President Trump's $500 billion project backed by SoftBank, Oracle, and OpenAI.
Despite the market sell-off, Wall Street analysts remain cautious. Bernstein analyst Stacy Rasgon stated that while DeepSeek's models are impressive, they are not miraculous.
Analysts expect further insights when Microsoft and Meta report earnings this week. Their outlooks could impact AI chipmaker Nvidia (NVDA), which generates over 40% of its revenue from these companies.