Energy stocks slide as DeepSeek throws into question the need for more AI power

Power company stocks dropped sharply following the launch of China’s DeepSeek AI, which promises more energy-efficient artificial intelligence operations.

Market impact: Major power utilities with ties to tech sector data centers experienced significant stock declines in Monday morning trading.

• Constellation Energy and Vistra Corp. shares fell more than 16%
• GE Vernova declined approximately 18%
• Talen Energy dropped over 15%

Previous market momentum: These power companies had been leading performers in the S&P 500 based on anticipated AI-related energy demand.

• Investors had been betting heavily on increased electricity consumption from AI data centers
• The power sector had been positioning itself as a key enabler of AI infrastructure growth
• Nuclear power particularly had seen renewed interest as a reliable, carbon-free energy source for data centers

Strategic partnerships: Several power companies had already secured significant agreements with tech giants for data center operations.

• Constellation Energy partnered with Microsoft to restart the Three Mile Island nuclear plant
• Talen Energy is providing power to Amazon’s data center from its Susquehanna nuclear facility
• Vistra Corp., while lacking a specific data center deal, had attracted investor interest due to its nuclear and natural gas assets
• GE Vernova had seen strong market performance based on expected AI-related demand for its gas and electric grid services

The DeepSeek factor: The Chinese AI lab’s debut has challenged fundamental assumptions about AI’s energy requirements.

• DeepSeek claims to offer a more cost-effective and energy-efficient AI model compared to U.S. competitors
• This development has caused investors to question previous projections about AI’s power consumption needs
• The market reaction suggests growing uncertainty about the scale of infrastructure investment needed for AI operations

Looking ahead: The sharp stock decline signals a potential reassessment of the relationship between AI advancement and energy consumption, with implications for both the power sector’s growth strategy and tech companies’ infrastructure planning.