AI Advancements by Chinese Startup DeepSeek Spark Market Uncertainty in Power Sector
AI-focused power stocks experienced a decline on Monday as news of technological advancements made by Chinese startup DeepSeek raised concerns about AI spending levels and market dominance by US companies.
Key Power Stocks Impacted:
* Constellation Energy (CEG): -17%
* Vistra Corp (VST): -21%
* GE Vernova (GEV): -17%
* Oklo (OKLO): -21%
DeepSeek's AI Model:
* Released on January 20th, DeepSeek presented an AI model that rivals chatbots from OpenAI and other US tech giants.
* It reportedly requires fewer AI chips than competing models, resulting in lower production costs.
Big Tech's Power Demand:
* Amidst Big Tech's insatiable energy requirements for data centers, power stocks have experienced significant growth in recent years.
* Goldman Sachs predicts a 160% surge in power demand by 2030.
* Constellation Energy, Vistra, and GE Vernova recently reached record highs following a $500 billion project announcement backed by companies like Microsoft, Oracle, and OpenAI.
Analyst Perspectives:
* Wall Street analysts have expressed skepticism about the market reaction to DeepSeek's advancements.
* Stacy Rasgon of Bernstein believes DeepSeek's models are impressive but not groundbreaking.
* Upcoming earnings reports from major AI data center spenders Microsoft (MSFT) and Meta (META) are expected to provide further clarity on the impact of AI investments.
* NVIDIA (NVDA), which derives a significant portion of revenue from these companies, is likely to be affected by their outlooks on AI infrastructure.