AI Advancements from DeepSeek Raise Concerns for US AI Market Dominance

AI-Exposed Power Stocks Drop Amid Market Sell-Off

Chinese AI startup DeepSeek's recent AI model release has raised questions about AI spending levels at US companies and their dominance in the AI market. As a result, AI-related power stocks witnessed a significant sell-off on Monday.

Nuclear and Power Stocks Fall Sharply

Constellation Energy (CEG), the largest nuclear plant operator in the US, experienced a record 19% decline. Electricity generator Vistra Corp (VST) and power equipment maker GE Vernova (GEV) also saw substantial drops of 29% and 21%, respectively. Even nuclear power startup Oklo (OKLO) faced a 21% decline.

DeepSeek's Model Raises Competition

DeepSeek's new AI model is viewed as competitive with those of US tech giants like OpenAI. Additionally, its lower production costs due to fewer AI chips required have further fueled concerns.

Tech's Surge in Energy Demand

Previously, Big Tech's data center energy requirements had boosted power stocks. However, DeepSeek's advances raise doubts about future AI spending levels.

Wall Street Analysts React

Analysts have downplayed the market's reaction, with Bernstein's Stacy Rasgon emphasizing that DeepSeek's model is not miraculous and that US AI researchers are aware of similar efficiency techniques.

Upcoming Earnings Reports to Provide Clarity

Microsoft (MSFT) and Meta (META), significant AI data center infrastructure spenders, are expected to report earnings later this week. Their outlooks could provide further insights into the impact of DeepSeek's model on the AI market.

Impact on AI Chipmaker Nvidia

Analysts estimate that Nvidia (NVDA) derives over 40% of its revenue from Microsoft, Meta, Alphabet, and Amazon. As such, any changes in AI spending could have a ripple effect on Nvidia's performance.