Eaton’s AI data center stock dips on the arrival of DeepSeek

The Investing Club, led by Jim Cramer, is making strategic moves in response to market fluctuations affecting AI infrastructure stocks. Eaton Corporation, a manufacturer of electrical components and power management systems for AI data centers, has recently experienced a significant price dip following news from Chinese AI startup DeepSeek.

Market context and timing: The broader market is experiencing a downturn, with momentum stocks declining and cyclical stocks responding to weakening economic indicators.

• The Atlanta Fed GDPNow forecast shows first-quarter economic growth dropping to 2.3% from 3.9% in early February
• Consumer discretionary and industrial sectors are among the worst-performing this month
• The Investing Club maintains a substantial cash position to buffer against market volatility

Investment decision details: The Charitable Trust is increasing its position in Eaton (ETN) by purchasing 25 shares at approximately $300 each.

• The purchase increases the Trust’s holding to 325 shares
• The position’s weighting will rise from 2.5% to 2.7%
• The stock is trading below levels seen during the DeepSeek announcement

DeepSeek impact analysis: The Chinese startup’s announcement of a more efficient language model triggered market concerns about future data center demand.

• Eaton’s stock fell 15% to $311 following DeepSeek’s January 27 announcement
• Unlike Nvidia, which has largely recovered, Eaton’s stock continues to face pressure
• Market fears about reduced data center demand have proven largely unfounded

Tech industry validation: Major technology companies are maintaining or increasing their AI infrastructure investments.

• Amazon, Microsoft, Meta Platforms, and Alphabet have all raised their 2025 capital expenditure forecasts
• No major tech companies have indicated plans to reduce AI infrastructure spending
• Eaton’s management views the shift toward inferencing data centers as potentially positive for construction timelines

Reading between the lines: While market reaction to DeepSeek’s announcement created short-term pressure on Eaton’s stock, fundamental demand for AI infrastructure appears unchanged or growing, suggesting the market may have overreacted to perceived threats to the data center sector.