AI-Powered Stock Sell-Off Sparked by Chinese AI Advancements
Constellation Energy Tanks Amid AI Spending Concerns
On Monday, AI-reliant energy stocks plummeted following a sell-off in tech stocks. The development raised questions about AI spending in US companies. Constellation Energy (CEG), the leading nuclear plant operator, dropped 19%. Electricity generator Vistra Corp (VST) recorded an intraday loss of 29%. GE Vernova (GEV), a power equipment manufacturer, fell by 21%. Oklo (OKLO), a nuclear power startup, witnessed a 21% decline.
Chinese AI startup DeepSeek's release of a competitive AI model on January 20 heightened concerns. This model reportedly requires fewer AI chips than US tech companies' counterparts and comes at a lower cost.
Goldman Sachs projected a 160% surge in power demand by 2030 due to Big Tech's extensive data center energy consumption. Last year, Constellation announced a nuclear power agreement with Microsoft to revitalize a Pennsylvania unit. In December, Meta issued proposals to nuclear energy developers to support its AI needs.
Constellation, Vistra, and GE Vernova set records last week after President Trump unveiled a $500 billion project backed by SoftBank (SFTBY), Oracle (ORCL), and OpenAI.
Wall Street analysts downplayed the market reaction. Bernstein senior analyst Stacy Rasgon emphasized that DeepSeek's models, while impressive, are not unparalleled.
Earnings Reports Anticipated for Further Clarity
Analysts anticipate more insights this week as Microsoft (MSFT) and Meta, major AI data center infrastructure spenders, release earnings. Their outlooks are expected to impact AI chipmaker Nvidia (NVDA), with Bloomberg data suggesting Microsoft, Meta, Alphabet (GOOG, GOOGL), and Amazon (AMZN) account for over 40% of its revenue.