AI-Exposed Power Stocks Tumble Amid Concerns Over Chinese Competitor
AI-centric energy stocks plummeted on Monday, mirroring the broader tech sell-off. The catalyst was DeepSeek, a Chinese AI start-up that unveiled a competitive AI model. This sparked questions about the spending levels and market dominance of US tech giants.
Constellation Energy (CEG), the leading nuclear plant operator in the US, lost 21%, while Vistra Corp (VST), an electricity generator, dropped a record 28%. GE Vernova (GEV), a power equipment provider, declined 21%. Oklo (OKLO), a nuclear power startup, also fell 25%.
DeepSeek's new AI model, released on January 20th, is seen as a rival to chatbots from OpenAI and other US tech firms. It is also more economical, requiring fewer AI chips.
Power Stocks: A Bull Run Cut Short
Surging data center demands from tech companies fueled a boom in energy stocks in 2024 and beyond. Goldman Sachs predicted that power consumption would increase by 160% by 2030.
Last year, Constellation announced a deal with Microsoft to revive a nuclear power plant in Pennsylvania. Meta also sought proposals from nuclear energy developers to support its AI initiatives.
Market Reaction Considered Excessive
Wall Street analysts dismissed the market's extreme reaction. Stacy Rasgon of Bernstein highlighted that DeepSeek's model is impressive but not groundbreaking. "It's not miraculous or unknown to top AI researchers," he said.
Earnings reports from Microsoft and Meta later this week are expected to provide further insights. Their outlooks will influence AI chipmaker Nvidia (NVDA), which derives over 40% of its revenue from these tech giants.