AI-Exposed Power Stocks Tumble Amidst Tech Sell-Off
Power sector stocks linked to artificial intelligence (AI) experienced a sharp decline on Monday, mirroring the sell-off in the broader technology industry. Concerns arose over potential shifts in AI spending following advancements made by the Chinese start-up DeepSeek.
Significant Declines
* Constellation Energy (CEG): -20.85%
* Vistra Corp (VST): -28.27%
* GE Vernova (GEV): -21%
* Oklo (OKLO): -25.61%
DeepSeek's Impact
On January 20, DeepSeek unveiled a competitive AI model that utilizes fewer AI chips compared to models from larger players. This cost-effective approach raised questions about the sustainability of current AI spending levels and the dominance of US companies in the market.
Big Tech Energy Consumption
In recent years, the insatiable energy requirements of data centers operated by Big Tech firms have driven strong demand for electricity, benefiting power stock valuations. Goldman Sachs projects power demand to increase by 160% by 2030.
Trump's Proposed Project
Last week, President Donald Trump announced a $500 billion project backed by Oracle (ORCL) and OpenAI, which temporarily boosted AI-related stocks.
Analyst Outlook
Market analysts have downplayed the magnitude of DeepSeek's impact. Stacy Rasgon of Bernstein believes that DeepSeek's advancements are not "miraculous" and that other AI research organizations are exploring similar efficiency gains.
Earnings Outlook
Earnings reports from Microsoft (MSFT) and Meta (META) this week are expected to provide further insight into AI infrastructure spending. These companies are major AI data center infrastructure investors, and their outlooks could influence the performance of chipmaker Nvidia (NVDA), which derives a significant portion of its revenue from these firms.