U.S. Power Stocks Plummet as DeepSeek AI Raises Doubts About Electricity Demand
Shares of U.S. power, utility, and natural gas companies experienced significant declines on Monday, driven by concerns over the impact of DeepSeek AI technology on projected electricity demand.
DeepSeek, a Chinese start-up, has developed a new AI model that is said to be faster, cheaper, and more efficient than models currently used by U.S. companies. This has raised questions about the potential for reduced electricity demand and a slowdown in the construction of new power plants.
Analysts at Evercore ISI noted that if DeepSeek's model proves effective, "it could result in a more moderated demand" from hyperscalers, companies that operate massive data centers.
Data centers have been a major contributor to the increased demand for electricity in recent years. However, the wider adoption of more energy-efficient AI models could result in lower overall electricity consumption.
Shares of independent power provider Constellation Energy, which had surged on expectations of selling power to data centers, tanked by 20%. Vistra and Talen Energy Corp also saw significant declines.
While concerns about DeepSeek AI may impact current power stock valuations, some experts believe that a sell-off could be short-sighted. Ed Hirs, an energy economist at the University of Houston, argues that even with more energy-efficient models, the wider adoption of AI could still lead to increased power demand.
Despite the uncertainty, the impact of DeepSeek AI on the U.S. power sector is still being assessed. Natural gas producers and midstream operators have also experienced declines in their share prices due to concerns about reduced demand for gas as a generation source for AI.